Application date 15-04-2020

• The proposed provision also extends to shareholder-employees of a company who may have paid provisional tax.
• The scheme is not intended for individuals. The majority of individuals are taxed through the PAYE system and are subject to auto-calculation (qualifying individuals) do not have losses so would be unaffected by this measure. However, those that operate businesses through partnerships, limited partnerships, and look-through companies would be able to benefit.
• The scheme is not available for residential rental losses. Taxpayers who have ringfenced rental losses would also not be able to carry back losses.
• Multi-rate PIEs (most unit trusts and KiwiSaver funds) may not carry back losses. Multi-rate PIEs (including KiwiSaver) have tax cash-out for losses so already benefit from immediate tax relief for losses.
• Companies imputation account must be in credit to obtain a refund of income tax of at least the amount of the refund at the end of the most recently ended tax year.
• If the loss carry-back is overestimated, resulting in tax to be paid later, standard use of money interest would apply in the normal way. And the taxpayer cannot use the remission of interest provisions in section 183ABAB of the Tax Administration Act 1994
• The loss carry-back must ultimately be supported by a net loss shown on a tax return filed for the loss year.
• If the tax return for the loss year is not filed, the loss carry-back deduction could be disallowed.
• If the taxpayer owes a debt on other tax types, Inland Revenue would not apply any of the refund arising from the loss carry-back to satisfy tax debts.
• Anti-avoidance provision is inserted in the bill. This would apply where a share in a company has been subject to an arrangement which allows a loss company to meet the requirements of the new section IZ 8 and the purpose of that arrangement is to defeat the intent of section IZ 8.

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