Income Tax Act 2007

Memorandum accounts - Terminating provisions

OZ 4: Terminating modifications to debits for loss of shareholder continuity

You could also call this:

“Special rules for company account credits when ownership changes”

When you own shares in a company, sometimes the company can keep track of special accounts called memorandum accounts. These accounts can be affected if the ownership of the company changes a lot. This law explains some special rules about these accounts.

If the company got credits in these accounts on or before 16 December 1988, they don’t have to worry about changes in who owns the company. These credits are safe no matter what.

For credits that came in after 16 December 1988 but before 1 April 1992, the law treats them all as if they happened on 1 April 1992. These credits have a special rule about how much the company’s ownership can change. Instead of the usual rule, they use an older rule that says the ownership can change more before it affects these credits. Specifically, the ownership can change up to 66% instead of 75% before it causes a problem.

These special rules keep working until the credits are used up by later debits in the 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=DLM1519716.

Topics:
Money and consumer rights > Taxes

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Part O Memorandum accounts
Terminating provisions

OZ 4Terminating modifications to debits for loss of shareholder continuity

  1. The terminating modifications that apply under section OA 8(8) (Shareholder continuity requirements for memorandum accounts) are—

  2. the shareholder continuity requirement does not apply to a credit that arises on or before 16 December 1988; and
    1. credits arising after 16 December 1988 and before 1 April 1992 are treated as 1 credit arising on 1 April 1992 and, until such time as the credit can be treated as cancelled by later debits,—
      1. the shareholder continuity requirement applying to the credit is the earlier version of the requirement incorporated in section 394E(2)(g) of the Income Tax Act 1976 (despite its repeal and replacement by section 51 of the Income Tax Act Amendment Act (No 2) 1992); and
        1. the earlier version of the requirement of section 394E(2)(g) applies by reading the figure 66 instead of the figure 75.
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