27 SEPTEMBER NEW ZEALAND GAZETTE 3225

equal to the difference between the NZ$ value of the acquisition price of the ASAP and the NZ$ value of the price.

(2) The acquisition price is equal to the core acquisition price, less (in the case of the holder) or plus (in the case of the issuer) any non-contingent fees paid by that party that qualify as item z in the definition of acquisition price in section OB 1.

(3) The core acquisition price is defined in section OB 1. The main component of the core acquisition price is, broadly, the lowest price the parties would have agreed upon, assuming payment in full at the time of delivery. You should refer to the detailed definition of core acquisition price contained in the Act.

(4) In the case of a foreign currency ASAP, the lowest price is denominated in a foreign currency, and must be converted into NZ$. Section OB 7 allows the use of two forward rates, Rates A and B (contained in paragraphs (a) and (b) of section OB 7(1) and described in paragraph 1(5) of this determination), but not all taxpayers will wish to use forward rates. This determination approves the use of the spot rate on certain alternative dates.

(5) If you are a party to an ASAP you will have to determine the lowest price, using either one of the statutory rates, or one of the rates prescribed by this determination. You will then have to spread any income or expenditure arising from the ASAP using the method described in this determination which is applicable to the rate you are using.

5. Interpretation—In this determination:

(1) a reference to the ‘‘Act’’ is a reference to the Income Tax Act 1994.

(2) ‘ASAP’ means an agreement for sale and purchase of property which is subject to the accrual rules;

‘Contract date’ means the date on which the foreign currency ASAP was entered into;

‘Foreign currency ASAP’ means an ASAP under which the price for the property the subject of the ASAP is denominated in foreign currency;

‘Forward rate’ means the rate for a forward contract as defined in paragraph 6(4) of Determination G6D: Foreign Currency Rates;

‘Lowest price’ is the lowest price referred to in paragraph (c) of the definition of ‘‘core acquisition price’’;

‘Payment date’ means a date on which any part of the price for the property transferred under an ASAP is paid by the buyer;

‘Price’ means the foreign currency price agreed to be paid in consideration for the property under an ASAP, including any agreed interest charges;

‘Rights date’ is the day on which the first right in the specified property subject to an ASAP is to be transferred;

‘Settlement date’ means the day on which final payment is to be made under the financial arrangement;

‘Spot rate’ means the rate for a spot contract as defined in paragraph 6(3) Determination G6D: Foreign Currency Rates.

(3) all other terms used have the same meaning given to them for the purposes of the qualified accruals rules in the Act.

As an aid to interpretation only, and not as a definitive list, the following are the terms defined in the Act that are of particular note: right in the specified property, trading stock, associated persons, agreement for the sale and purchase of property.

6. Rate and Method—General—(1) All the methods approved by this determination require you to treat yourself as a party to a foreign currency loan or loans. The nature of the foreign currency loan or loans is set out in paragraphs (2) to (4).

(2) To the extent that the price is paid before the rights date, treat yourself as a party to a loan:

• from the buyer to the seller:
  • of an amount equal to the amount of the price paid before the rights date;
  • advanced on the date the amounts are paid;
  • repaid on the rights date;
  • with a repayment amount equal to the amount of the lowest price, less any amount paid on the rights date, and less the amount attributable to the advance under any loan referred to in (3).

(3) To the extent that the price is paid after the rights date, treat yourself as a party to a loan:

• from the seller to the buyer;
  • of an amount equal to the lowest price, less any amount paid on the rights date, and less any amount attributable to the repayment of any loan referred to in (2);
  • advanced on the rights date;
  • repaid on the payment date or payment dates occurring after the rights date;
  • with a repayment amount equal to the price, less any amount paid on or before the rights date.

(4) In many cases you may be able to apply Determination G9A to the loan.

7. Method A—Forward Rate to Rights Date—(1) If you adopt method A you must use Rate A to calculate the NZ$ value of the lowest price.

(2) In a year before the year in which you are required to do a base price adjustment for the foreign currency ASAP, calculate your income or expenditure by applying an available method under the qualified accruals rules as if you were party to a loan or loans as set out above in ‘Method—General’.

Also take into account, as income or expenditure in any year up to and including the year in which the rights date occurs, the amount

a – b

where

‘a’ is the NZ$ value of the lowest price converted using either

(i) if the rights date is after the end of the year, the forward rate from the last day of the relevant income year to the rights date;

(ii) in any other case, the spot rate on rights date.

‘b’ is the NZ$ value of the lowest price converted using the forward rate to the rights date from whichever is the later of:

(i) the last day of the previous income year;

(ii) the contract date.

using a reasonable estimate of the rights date at that time (unless a(ii) applies).

(3) If a – b is a negative, this amount will be income if you are the buyer, and expenditure if you are the seller. If a – b is a positive, the amount will be income if you are the seller, and expenditure if you are the buyer.

8. Method B—Forward Rate to Settlement Date—(1) If you adopt method B, you must use Rate B to calculate the NZ$ value of the lowest price.