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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions - Entry to new life insurance regime: transitional and miscellaneous provisions

EZ 63: Disposal and acquisition upon entry

You could also call this:

“How life insurance companies handle property when new tax rules begin”

This law applies to life insurance companies on a specific day called the “application day”. For most companies, this day is 1 July 2010. However, if a company has an early life regime application day, that day becomes their application day instead.

Just before the application day, the law treats all the company’s property that supports actuarial reserves as if it was sold to someone else for its market value. The company is then treated as if it immediately bought back this property for the same price.

However, if the company owns a share in a PIE (Portfolio Investment Entity) that isn’t listed on the stock exchange, this property isn’t included in this pretend selling and buying back process.

The actuarial reserves mentioned here are used in a formula called the policyholder income formula. You can find more information about this formula in section EY 43 of the Income Tax Act 2007.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3066600.

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Money and consumer rights > Taxes
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Part E Timing and quantifying rules
Terminating provisions: Entry to new life insurance regime: transitional and miscellaneous provisions

EZ 63Disposal and acquisition upon entry

  1. This section applies for a life insurer immediately before a day (the application day) that is—

  2. 1 July 2010, if the life insurer does not have an early life regime application day; or
    1. their early life regime application day, if the life insurer does have an early life regime application day.

      1. Immediately before the application day, all of the property of a life insurer that supports actuarial reserves for the purposes of the policyholder income formula in section EY 43 (Policyholder income formula) is treated as disposed of, for market value consideration, to a third person, and immediately re-acquired from that person for the same consideration.

      2. Property that is an interest in a PIE that is not a listed PIE is excluded from the disposal and re-acquisition described in subsection (2).

      Notes
      • Section EZ 63: added, on , by section 200 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
      • Section EZ 63 list of defined terms portfolio-listed company: repealed (with effect on 30 June 2010), on , by section 66 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).