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Income Tax Act 2007

Taxation of certain entities - Qualifying companies (QC)

HA 33B: Transitional rules for look-through companies, partnerships, and sole traderships

You could also call this:

“Rules for tax choices when businesses change their structure”

If you’re a shareholder in a company that’s becoming a look-through company (LTC), your previous elections about how the company is taxed might be cancelled. This happens if the company has told the tax department (the Commissioner) that it wants to be an LTC. The company needs to do this for either the first or second tax year starting on or after 1 April 2011. When this happens, your old choices are cancelled at the start of that tax year.

The same thing happens if your company is changing into a partnership or a business run by just one person (a sole tradership). If the company tells the tax department about this change for either the first or second tax year starting on or after 1 April 2011, your previous tax choices for the company are cancelled. This cancellation also starts at the beginning of that tax year.

These rules help make sure that when a company changes how it’s structured for tax purposes, everyone starts fresh with the new arrangement.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3683715.

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Part H Taxation of certain entities
Qualifying companies (QC)

HA 33BTransitional rules for look-through companies, partnerships, and sole traderships

  1. All elections by shareholders under section HA 5 are revoked if, for the company and the relevant shareholders, a LTC election has been received by the Commissioner under section HB 13(3)(c) and (4) (LTC elections) for the first or second income year that starts on or after 1 April 2011.

  2. The revocation of the elections under subsection (1) takes effect at the beginning of the relevant income year.

  3. All elections by shareholders under section HA 5 are revoked if, for the company and the relevant shareholders, a notice of intention has been received by the Commissioner for the first or second income year that starts on or after 1 April 2011 under section HZ 4B(7)(a) or HZ 4D(4)(a) (which relate to transitions to partnerships and sole traderships).

  4. The revocation of the elections under subsection (3) takes effect at the beginning of the relevant income year.

Notes
  • Section HA 33B: inserted, on (applying for income years beginning on or after 1 April 2011), by section 76(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
  • Section HA 33B list of defined terms notice: inserted, on , by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).