Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
LE 2: Use of remaining credits by companies and trustees
or “How companies and trustees can use leftover tax credits”
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.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

Next up: LE 3: Use of remaining credits by others

or “Carrying forward unused tax credits to the next year”
Next

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).