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Income Tax Act 2007

Memorandum accounts - Imputation credit accounts (ICA)

OB 67: Reduction of further income tax

You could also call this:

“How ICA companies can reduce extra income tax owed”

If you’re an ICA company, you might be able to reduce the extra income tax you owe. This can happen if your imputation credit account had a negative balance at the end of a tax year. To reduce your tax, the credits in the next tax year need to be less than the negative balance. You also need to tell the Commissioner about this.

The amount you can reduce is based on a simple math formula. You take the negative balance at the end of the second year and subtract the difference between the first year’s negative balance and the credits made in the second year (if this difference is more than zero).

If you’re a qualifying company, you might be able to reduce your extra tax in another way. This can happen if you get a refund of income tax that creates a debit in your account. The amount you can reduce is calculated by subtracting all the credits in your account from all the refunds you’ve received since the first refund.

Remember, these rules are part of the Income Tax Act 2007 and apply to memorandum accounts. If you need more information about specific parts of this law, you can look at sections OB 65 and OB 66 or section OB 32.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1518874.

Topics:
Money and consumer rights > Taxes
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OB 66: Further income tax when company stops being ICA company, or

“Extra tax for companies ending their ICA status”

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OB 68: Income tax paid satisfying liability for further income tax, or

“Using income tax to pay off extra company tax”

Part O Memorandum accounts
Imputation credit accounts (ICA)

OB 67Reduction of further income tax

  1. An ICA company’s liability for further income tax under sections OB 65 and OB 66 may be reduced under subsection (2) if—

  2. a debit balance existed in the company’s imputation credit account at the end of a tax year; and
    1. the credits that arise in the account in the following tax year totals less than the debit balance; and
      1. the company notifies the Commissioner.

        1. In relation to 2 tax years that are consecutive, the liability for further income tax at the end of the second tax year is reduced to the amount calculated using the formula—

          debit balance at end of second year − first year adjustment.

          Where:

          • In the formula in subsection (2),—

          • debit balance at end of second year is the amount of the debit balance in the company's imputation credit account at the end of the second tax year:
            1. first year adjustment is the greater of zero and the amount by which the first year’s debit balance in the company’s imputation credit account exceeds the credits made to the account during the second tax year.

              1. The liability of an ICA company that is a qualifying company for further income tax under sections OB 65 and OB 66 may be reduced under subsection (4) if an imputation debit arises under section OB 32 (table O2: imputation debits, row 4 (refund of income tax)) in the company’s imputation credit account before the end of the tax year for which the liability arises.

              2. The liability of the qualifying company for further income tax at the end of the tax year referred to in subsection (3) is reduced by an amount calculated using the formula—

                refunds − credits.

                Where:

                • In the formula in subsection (4),—

                • refunds is the total amount of all refunds of income tax paid to the company before the debit balance creating the liability for further income tax referred to in subsection (3) arises:
                  1. credits is the total amount of all credits to the company’s imputation credit account for the period that runs from the tax year in which the first refund was received to the time the calculation is made.

                    Compare
                    Notes
                    • Section OB 67(2) heading: substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), pursuant to section 113(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section OB 67(2): substituted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 113(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section OB 67(2): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 206(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section OB 67(2B) heading: inserted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 113(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section OB 67(2B): inserted (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 113(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
                    • Section OB 67(2B)(b): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on , by section 206(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                    • Section OB 67(5): amended (with effect on 1 April 2008), on (applying for the 2008–09 and later income years), by section 113(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).