39Consequential adjustments on change in balance date

1. If the Commissioner approves a change to a new balance date that is earlier in the calendar year than the original balance date, the change is effected by the taxpayer having a transitional year of the period from the original balance date up to and including the new balance date in the next succeeding calendar year.

2. If the Commissioner approves a change to a new balance date that is later in the calendar year than the original balance date, the change is effected by the taxpayer having a transitional year of the period from the original balance date up to and including the new balance date in the same calendar year.

3. If the change in balance date means that a taxpayer has 2 corresponding income years for the same tax year, the figures for both corresponding income years are aggregated when the taxpayer's net income or net loss is determined.

4. For the purpose of giving effect to this section and section 38, the Commissioner may, for any corresponding income year, make any assessment that the Commissioner considers necessary.

5. For the tax year corresponding to the income year or income years in which the change of balance date occurs, the basic tax rate for the purposes of the Income Tax Act 2007 and this Act is the rate that would apply if the person’s taxable income for the tax year were calculated using a value for the person’s net income, or net loss, for the tax year equal to the total of—

6. the amount that, if the person had no income or expenditure associated with each business activity affected by a change of balance date for the tax year, would be obtained by subtracting the person’s annual total deduction for the tax year from the person’s annual gross income for the tax year; and
7. for each business activity affected by a change of balance date for the tax year, the amount given by subsection (6) for the tax year and the business activity.

8. The amount given by this subsection, for a tax year and a business activity affected by a change of balance date for the tax year, is calculated using the formula—

   $unadjusted\; business\; net\; \times \; year\; days\; ÷\; income\; year\; days.$

   Where:

9. In the formula,—

10. unadjusted business net is the amount that, if the person had no income or expenditure other than income and expenditure associated with the business activity, would be the difference between the person’s annual gross income for the tax year and the person’s annual total deduction for the tax year:
11. year days is—
    1. 365, if subparagraph (ii) does not apply:
    2. 366, if the income year or income years corresponding to the tax year include a 29 February:
12. income year days is the total days in the income year or income years corresponding to the tax year.