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Income Tax Act 2007

Timing and quantifying rules - Allocation of deductions for excess residential land expenditure - Application of rules by certain entities

EL 15: Transfers between companies in wholly-owned groups

You could also call this:

“Sharing tax benefits between companies owned by the same people”

If you’re part of a company that belongs to a group where all the companies are owned by the same people, you might be able to share some money-related benefits with other companies in your group. This is about unused amounts of money that your company couldn’t use to lower its taxes in a certain year.

If your company (let’s call it Company A) has some leftover money that it couldn’t use to reduce its taxes, it can give some or all of this money to another company in your group (let’s call it Company B). This leftover money comes from rules about residential rental properties.

When Company B gets this money from Company A, it can use it to lower its own taxes. It works like Company B spent this money on a house it rents out to people.

For this to work, both Company A and Company B need to tell the tax office about this transfer when they file their tax returns for that year. Once they do this, the transfer is considered complete.

Remember, this only works for companies that are part of the same group where all the companies are owned by the same people. It’s a way for these related companies to help each other out with their taxes.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=LMS223693.

Topics:
Money and consumer rights > Taxes
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Part E Timing and quantifying rules
Allocation of deductions for excess residential land expenditure: Application of rules by certain entities

EL 15Transfers between companies in wholly-owned groups

  1. If a company (company A) that is part of a wholly-owned group of companies has an unused excess amount under section EL 4(3), EL 5(3), or EL 7(3) for an income year, the company may transfer some or all of the excess amount to another company (company B) in the group.

  2. The amount transferred is treated as a deduction for expenditure or loss referred to in section EL 4(1) of company B in relation to a residential rental property of company B for an income year in which company B derives residential income.

  3. The transfer of an excess amount is treated as made when both company A and company B take tax positions on that basis in their returns of income for the relevant income year.

Notes
  • Section EL 15: inserted (with effect on 1 April 2019), on , by section 62(1) (and see section 62(2) and (3) for application) of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).
  • Section EL 15(1): amended (with effect on 1 April 2019), on , by section 111 of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).