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Income Tax Act 2007

Tax credits and other credits - Tax credits for imputation credits

LE 2B: Use of remaining credits by life insurer on policyholder base

You could also call this:

“How life insurers can use leftover policyholder tax credits as deductions”

If you are a life insurer and you have some leftover tax credits for your policyholder base at the end of a tax year, you can use them in a special way. You can turn these leftover credits into a deduction for the next tax year.

To figure out how much of a deduction you can get, you need to do a simple maths calculation. You take the amount of leftover credits and divide it by the basic rate of income tax for policyholders. This rate is found in a part of the tax law called Schedule 1.

The result of this calculation becomes a deduction that you can use in the next tax year. This deduction is specifically for your policyholder base, which is a part of your insurance business.

This rule helps you make use of tax credits that you couldn’t use in the previous year, by turning them into a deduction you can use in the following year.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3113117.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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LE 3: Use of remaining credits by others, or

“Carrying forward unused tax credits to the next year”

Part L Tax credits and other credits
Tax credits for imputation credits

LE 2BUse of remaining credits by life insurer on policyholder base

  1. This section applies to a life insurer who has an amount of tax credit remaining for a tax year (the surplus credit year) under section LA 5(4) (Treatment of remaining credits), but only to the extent to which the amount is for their policyholder base.

  2. The life insurer has a deduction included as their policyholder base allowable deduction, for the income year corresponding to the tax year after the surplus credit year equal to an amount calculated using the formula—

    policyholder remaining credit ÷ policyholder rate.

    Where:

    • In the formula,—

    • policyholder remaining credit is the amount of the tax credit remaining for the surplus credit year under section LA 5(4), but only to the extent to which the amount is for the life insurer's policyholder base:
      1. policyholder rate is the basic rate of income tax set out in schedule 1, part A, clause 8 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits).

        Notes
        • Section LE 2B: inserted, on , by section 326(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).