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Income Tax Act 2007

Memorandum accounts - Terminating provisions

OZ 6: ASCA redemption of unused investments

You could also call this:

“Tax rules for public trusts and funds buying back special shares”

If you have a public unit trust or a group investment fund that earns category A income, this part of the law explains what happens in a specific situation. This situation occurs when the trust or fund buys back a special kind of share, and they have never set up an account called an ASC account before.

In this case, the company can choose to create an ASC account. When they do this, the only credit that goes into this new account is a starting balance. This starting balance is worked out using a method described in section OZ 5(5).

Once this starting balance is put into the account, it’s treated as if it’s the final balance of the account. This means the account is opened and closed with the same amount.

Remember, this only applies to shares that fit a special definition found in section YA 1 of the law. These aren’t ordinary shares but are defined in a specific way for tax purposes.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1519720.

Topics:
Money and consumer rights > Taxes
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OZ 5: ASCA lost excess available subscribed capital, or

“How to calculate credits for redeemed units in certain trusts and funds”

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OZ 7: Memorandum accounts in transitional period, or

“Rules for special tax records during a set timeframe”

Part O Memorandum accounts
Terminating provisions

OZ 6ASCA redemption of unused investments

  1. The section applies when a public unit trust or a group investment fund that derives category A income—

  2. redeems a share within the meaning in paragraphs (c) and (d) of the definition of share in section YA 1 (Definitions); and
    1. has never established an ASC account.

      1. The company may choose to establish an ASC account, and the only ASC credit arising in the account is an ASC credit for an opening balance calculated under section OZ 5(5).

      2. An opening balance under subsection (2) is treated as the closing balance of the account.

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