CA ANZ Core 4: Tax (NZ) key terms

The amount on which income tax is calculated, being total assessable income for the year less all allowable deductions, with net losses from earlier years applied where permitted.

All income a person derives in a tax year that the Income Tax Act 2007 treats as subject to tax, including salary, business profits, rents, dividends and certain capital amounts.

An expense or loss incurred in deriving assessable income, or incurred in carrying on a business for that purpose, that is not excluded by a specific limitation or capital restriction.

The positive test in the Income Tax Act allowing a deduction for expenditure or loss incurred in deriving assessable income or in carrying on a business for the purpose of deriving it.

The rule denying a deduction for expenditure or loss of a capital nature, distinguishing enduring capital outlay from revenue expenses that are deductible when incurred.

Rules spreading income and expenditure across periods for accrual taxpayers, recognising income when it is earned rather than received and deductions when incurred rather than paid, using methods such as the yield to maturity and straight-line methods.

Broadly, any arrangement under which money is provided now in return for money provided later, including loans, debt securities, instalment sales and foreign exchange contracts, subject to specific exclusions.

The calculation performed when a financial arrangement matures or is disposed of, comparing all consideration paid and received to determine a final accrual income or expenditure amount.

A natural person or trustee who qualifies for a simplified treatment of financial arrangements because their income and expenditure from such arrangements fall below statutory thresholds, allowing recognition on a cash basis.

Property held for sale or exchange in the ordinary course of business, or that would be sold in the ordinary course, including raw materials and work in progress, with closing values determined under statutory valuation methods.

A permitted closing valuation for trading stock representing the amount the taxpayer could expect to receive from selling the stock in the ordinary course of business at balance date.

Instalment payments of income tax during the year for taxpayers whose residual income tax exceeds the statutory threshold, calculated from prior-year income or an estimate.

Income tax payable for a year less credits and amounts withheld, used to determine provisional tax obligations and whether use of money interest applies.

Interest Inland Revenue charges or pays when tax is underpaid or overpaid beyond the statutory due date, calculated at rates set by regulation.

A broad-based indirect tax of 15 percent on supplies of goods and services in New Zealand by registered persons, and on imports, with credits available for input tax on business purchases.

GST charged on goods and services acquired by a registered person for the purpose of making taxable supplies, which can generally be claimed as a credit against output tax.

A supply that is subject to GST at a rate of zero percent, such as certain exports and going concerns, while still being a taxable supply for input tax purposes.

A supply listed in the GST Act as neither taxable nor zero-rated, such as certain financial services and residential accommodation, so no output tax arises and no input tax is claimable.

A supply of goods or services made in New Zealand by a registered person in the course or furtherance of a taxable activity, other than an exempt supply.

A company that meets eligibility criteria and elects look-through treatment, so owners are taxed directly on the company's income and may claim its deductions, while remaining liable only to the extent of their own tax.

A rule limiting the deductions an owner of a look-through company can claim to the amount of their economic investment in the company, preventing losses from reducing tax on unrelated income.

An association of persons carrying on a business jointly with a view to profit, treated as transparent for tax so each partner returns their share of partnership income and deductions.

An arrangement where a trustee holds property for beneficiaries, with the trustee taxed on trustee income at the trustee rate and beneficiary income taxed to beneficiaries who derive it.

Income derived by a trustee that is distributed to, or vested in, a beneficiary in the income year, taxed to that beneficiary rather than to the trustee.

Trust income that is not beneficiary income, taxed to the trustee at the trustee rate, subject to specific allocation rules for certain settlements.

A person who transfers value to, or for the benefit of, a trust, which can trigger specific tax rules including the taxation of trustee income on a settlor basis for certain trusts.

An annual deduction spreading the cost of depreciable property over its estimated useful life, calculated using rates and methods set by the Commissioner or allowed by election.

Property that might reasonably be expected to decline in value while used or available for use in deriving assessable income or carrying on a business, excluding land and certain specified items.

A test taxing gains from disposing of residential land within a set period after acquisition, subject to the main home exclusion and other exceptions.

A factor indicating that profits from disposing of land are assessable when the land was acquired with a purpose or intention of disposal, subject to statutory exclusions such as the main home.

A foreign company controlled by New Zealand residents, whose income may be attributed to those residents under the CFC rules unless an exemption such as the active business test applies.

An interest in a foreign entity or arrangement that can trigger attribution of income to a New Zealand resident under the FIF rules, using methods such as fair dividend rate or comparative value.

A FIF calculation method that attributes a set percentage of the investment's opening value as taxable income each year, regardless of actual dividends or gains.

A bilateral treaty allocating taxing rights between New Zealand and another country and providing relief from double taxation through credits or exemptions.

A tax withheld on certain payments, such as interest, dividends and royalties, made by New Zealand residents to non-residents, at rates often reduced by a double tax agreement.

An arrangement entered into with a dominant purpose of avoiding or defeating the intent of the tax legislation, which the Commissioner may counteract by adjusting the taxable income of the parties.

A statutory concept describing an arrangement with a more than merely incidental purpose or effect of tax avoidance, allowing the Commissioner to void the arrangement and reassess.

A penalty imposed under the Tax Administration Act calculated as a percentage of the resulting tax shortfall, graded by the taxpayer's behaviour from lack of reasonable care to evasion.

A ruling issued by the Commissioner on how tax law applies to a specific arrangement, binding the Commissioner in relation to that arrangement while it applies.