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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 61: Allowance for cancelled amount: spreading

You could also call this:

“Spreading out tax deductions for cancelled policyholder amounts”

You can choose to include a deduction amount in your policyholder base allowable deduction for an income year that includes 1 July 2010 and later income years. To do this, you need to tell the Commissioner by sending a notice. You must send this notice by the last day for giving your tax return for that income year, or within any extra time the Commissioner allows.

You can only do this if you have no taxable income, except for your policyholder base, for the tax year that matches the income year. This must also be true for every earlier tax year back to and including the tax year that matches the income year with 1 July 2010 in it.

The deduction amount you choose must be equal to or less than the smallest of these three things:

Your available tax loss for the matching tax year, before using this rule
Your available concession amount for the income year
What your schedular policyholder base income would be for the income year, before using this rule

To work out your available concession amount, you use this sum: base concession amount minus used.

The base concession amount is the smaller of two things:

The cancelled amount from section IT 1
Your available tax loss for the tax year that matches the income year with 1 July 2010 in it, before using this rule

‘Used’ means the total amount of policyholder base allowable deductions you’ve already had from using this rule in earlier income years.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3112432.

Topics:

Money and consumer rights > Taxes

EZ 60: Actuarial reserves: calculation, or

“How life insurance companies calculate money set aside for future payouts”

EZ 62: Reinsurance transition: life financial reinsurance may be life reinsurance, or

“Special treatment of some older life insurance contracts as life reinsurance”

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

EZ 61Allowance for cancelled amount: spreading

For an income year that includes 1 July 2010 and later income years, a life insurer may choose, by a notice received by the Commissioner on or before the last day for furnishing a return of income for the relevant income year or within such further time as the Commissioner may allow, that an amount (the deduction amount) is included as their policyholder base allowable deduction for the income year, if—
the life insurer has no taxable income, other than in relation to its policyholder base, for the tax year corresponding to the income year, and no taxable income, other than in relation to its policyholder base, for every earlier tax year going back to, and including, the tax year that corresponds with the income year that includes 1 July 2010; and
the deduction amount is stated in the notice and it is equal to or less than the least of the following:
1. the available tax loss for the tax year that corresponds with the income year, before applying this section; and
2. the available concession amount for the income year, described in subsection (2); and
3. the amount that would be the life insurer's schedular policyholder base income for the income year, before applying this section for the year.

For the purposes of subsection (1), the available concession amount for the income year is a positive amount calculated using the formula—
$base concession amount − used.$

Where:
In the formula,—
base concession amount is the lesser of the following:
1. the cancelled amount described in section IT 1 (Cancellation of life insurer's policyholder net losses); and
2. the amount of available tax loss for the tax year that corresponds with the income year that includes 1 July 2010, before applying this section for the year:
used is the total amount of policyholder base allowable deductions that have arisen under this section for income years before the income year.

Notes

Section EZ 61: inserted, on 1 July 2010, by section 199(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).