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New Zealand law explained for everyone

Income Tax Act 2007

Memorandum accounts - Available subscribed capital accounts (ASCA)

OF 4: ASCA redemption credit

You could also call this:

“Credit received when redeeming a share in your company with Available Subscribed Capital”

When you own a company that has an Available Subscribed Capital (ASC) account, you can get an ASC credit when you redeem a share in your company. To figure out if you get a credit, you need to do some maths. You take the ASC amount for the share and subtract the money you got from redeeming it. The ASC amount is worked out using a special rule in section CD 22(4). The money you got from redeeming the share is figured out using rules in sections CD 4 to CD 6.

If the result of this sum is more than zero, that’s how much ASC credit you get. If it’s zero or less, you don’t get any credit. This credit is listed in a special table called O11: ASC credits, and it’s in row 2, called “redemption credit”.

The credit is counted on the day you redeem the share. This means the day you actually buy back or cancel the share is when you get the credit in your ASC account.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519269.

Topics:
Money and consumer rights > Taxes
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OF 3: Choosing to become ASC account company, or

“How certain companies can choose to become ASC account companies and what it means”

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OF 5: ASCA transfer to imputation credit account, or

“Moving money from a company's ASC account to its imputation credit account”

Part O Memorandum accounts
Available subscribed capital accounts (ASCA)

OF 4ASCA redemption credit

  1. An ASC account company has an ASC credit when the company redeems a share in the company for an amount calculated using the formula—

    ASC amount − redemption proceeds.

    Where:

    • In the formula,—

    • ASC amount is the amount of the available subscribed capital for the redemption calculated under section CD 22(4) (Returns of capital: off-market share cancellations):
      1. redemption proceeds is the amount of the proceeds from the redemption calculated under sections CD 4 to CD 6 (which relate to the nature of a dividend).

        1. If the result of the formula in subsection (1) is negative, the amount is treated as zero.

        2. The ASC credit in subsection (1) is referred to in table O11: ASC credits, row 2 (redemption credit).

        3. The credit date is the day the company redeems the share.

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