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Income Tax Act 2007

Memorandum accounts - Memorandum accounts of consolidated groups - Imputation debits of consolidated imputation groups

OP 45: Consolidated ICA redemption debit

You could also call this:

“Reducing group tax credits when a fund manager receives money from selling units or investments”

When you’re part of a group of companies that share tax credits, you might have to reduce your tax credits in certain situations. This happens when a company in your group manages a unit trust or an investment fund and gets money back from units or investments they’ve sold.

For this to apply, the company managing the fund must not be an Australian company. They need to have bought the units or investments in the normal course of running the fund, and on the same terms as other investors.

The amount you need to reduce your tax credits by is the larger of two calculations. The first calculation looks at the tax credits attached to the money received from selling units or investments, minus any tax credits already lost. The second calculation is more complex and considers the total money received, the company’s income, tax bill, and any tax credits already lost.

You need to reduce your tax credits on the day your group files its tax return for the year when the money was received from selling the units or investments.

If you want to know more about losing tax credits for other reasons, you can look at section OP 42.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519505.

Topics:
Money and consumer rights > Taxes
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Part O Memorandum accounts
Memorandum accounts of consolidated groups: Imputation debits of consolidated imputation groups

OP 45Consolidated ICA redemption debit

  1. A consolidated imputation group has an imputation debit for the amount of a redemption debit.

  2. A redemption debit arises when—

  3. a group company that is not an Australian ICA company is—
    1. the manager of a unit trust; or
      1. the trustee or manager of a group investment fund; and
      2. the group company derives a dividend from the redemption or cancellation of—
        1. a unit issued by the unit trust; or
          1. an interest of an investor in the group investment fund; and
          2. the company has acquired the unit or interest in the ordinary course of its management activities for the unit trust or group investment fund; and
            1. the unit or interest had been acquired by the company on the same terms as those offered to the investors in the unit trust or group investment fund.

              1. The debit is for the greater of the amounts described in subsections (4) and (6) calculated for the income year referred to in subsection (8) in which the group company derives the dividend referred to in subsection (2)(b).

              2. The first amount is calculated using the formula—

                credits attached − imputation debits.

                Where:

                • In the formula in subsection (4),—

                • credits attached is the total amount of all imputation credits attached to dividends derived by the group company in the income year in the circumstances set out in subsection (2):
                  1. imputation debits is the amount of imputation debits in the income year under section OP 42 in the group’s imputation credit account.

                    1. The second amount is calculated using the formula—

                      (total dividends ÷ taxable income) × (tax liability − continuity debits).

                      Where:

                      • In the formula in subsection (6),—

                      • total dividends is the total amount of all dividends derived in the circumstances set out in subsection (2), including imputation credits attached to the dividends:
                        1. taxable income is the taxable income of the group company for the tax year corresponding to the income year in which the dividends are derived:
                          1. tax liability is the group company’s income tax liability for the tax year corresponding to the income year in which the dividends are derived:
                            1. continuity debits is the amount of imputation credits attached to the dividends that have been cancelled by an imputation debit under section OP 42.

                              1. The table references are as follows:

                              2. the imputation debit in subsection (1) is referred to in table O20: imputation debits of consolidated imputation groups, row 19 (redemption debit):
                                1. the imputation debit in subsection (5)(b) is referred to in table O20: imputation debits of consolidated imputation groups, row 16 (debit for loss of shareholder continuity):
                                  1. the imputation debit in subsection (7)(d) is referred to in table O20: imputation debits of consolidated imputation groups, row 16 (debit for loss of shareholder continuity).

                                    1. The debit date is the day the company or the group’s nominated company files the return of income for the tax year corresponding to the income year in which the dividend is derived.

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                                    Notes
                                    • Section OP 45(5)(a): amended, on , by section 238(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                    • Section OP 45(7)(a): amended, on , by section 238(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                                    • Section OP 45 list of defined terms FDP credit: repealed, on , by section 238(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).