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Income Tax Act 2007

Income - Excluded income - Definitions

CX 63: Dividends derived after company ceased to be look-through company

You could also call this:

“Dividend exclusions after company stops being look-through”

When a company stops being a look-through company, you might receive dividends from it. These dividends can be excluded from your income, but only up to a certain amount.

To figure out how much of the dividend you can exclude, you need to do a calculation. First, imagine the company sold all its stuff (except cash) at market value, paid off all its debts, and then gave out the leftover cash to its shareholders. The amount of this imaginary payout is called ‘exit dividends’.

Next, you need to know how much the company has already paid out in dividends since it stopped being a look-through company. This amount is called ‘dividends after look-through’.

The amount of dividend you can exclude from your income is the difference between these two amounts: exit dividends minus dividends after look-through.

Remember, this only applies to dividends you get after the company has stopped being a look-through company. Any amount of dividend above this calculated amount will be counted as part of your income.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3682200.

Topics:
Money and consumer rights > Taxes
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Part C Income
Excluded income: Definitions

CX 63Dividends derived after company ceased to be look-through company

  1. A dividend derived by a person from a company after it has ceased to be a look-through company is excluded income of the person to the extent to which it is equal to or less than the amount given by subsection (2).

  2. For the purposes of subsection (1), the amount is calculated using the following formula:

    exit dividends − dividends after look-through.

    Where:

    • The items in the formula are defined in subsections (4) and (5).

    • Exit dividends is the sum of the amounts that would be dividends if the company, immediately after it ceased to be a look-through company,—

    • disposed of all of its property, other than cash, to an unrelated person at market value for cash; and
      1. met all its liabilities at market value, excluding income tax payable through disposing of the property or meeting the liabilities; and
        1. were liquidated, with the amount of cash remaining being distributed to its shareholders without imputation credits attached.

          1. Dividends after look-through is the total dividends paid by the company after it ceases to be a look-through company and before it pays the dividend described in subsection (1) to the person.

          Notes
          • Section CX 63: added, on (applying for income years beginning on or after 1 April 2011), by section 36 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
          • Section CX 63(4)(c): amended, on , by section 41(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
          • Section CX 63 list of defined terms FDP credit: repealed, on , by section 41(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).