✨ Tax Determination Details
4164 NEW ZEALAND GAZETTE, No. 142 29 NOVEMBER 2012
5. Interpretation
In this determination (and the Explanation), unless the context otherwise requires:
Words and expressions that are not defined elsewhere in the determination have the same meaning as in section YA1 of the Income Tax Act 2007;
NZ IFRS 9 means the New Zealand Equivalent to International Financial Reporting Standard 9 – Financial Instruments, or equivalent as updated or changed from time to time.
6. Method
Profit Emerging Method
The profit emerging method is illustrated in the following formula:
AI = AC – (PC x OF)
TECC
Where:
AI = assessable income of an ABD for an income year
AC = actual cash collected from the ABD during the income year
PC = purchase costs of ABD
OF = original cash forecasted to be collected during the income year
TECC = total expected cash to be collected over the spreading period, forecast at date of purchase
Once the cost of the ABD is fully amortised, cash collected after the spreading period will be treated as derived in the income year in which it is received.
Base Price Adjustment Calculation
The base price adjustment calculation arising upon the transfer of ABDs from NZC to NZC-2, members of the same consolidated group at the date of transfer (but not for the whole income year), is illustrated in the following formula:
BPA = C – I + E + AR
Where:
C = Consideration
= total cash collected + consideration for transfer – purchase cost
Consideration for transfer = PC – D – (F x 336/366)
PC = purchase costs of ABD
D = total deductions allowed in prior income years for the ABD
F = NZC’s original forecast deduction for the ABD for the whole of the 2012 income year, expressed as PC x OF/TECC
I = income
E = expenditure
AR = amounts remitted
7. Example
This example illustrates the application of the method (set out in this determination) for determining the income and expenditure attributable to a transferred ABD in each income year. Balance date is 30 June.
This example uses the following parameters.
Purchase date 1 July 2009
ABD purchase cost (PC) 1,000,000
Forecast cash collection (OF)
Year 1 1,068,000
Year 2 582,000
Year 3 274,000
Year 4 58,000
Year 5 18,000
Total expected cash collected over five years (TECC) 2,000,000
Actual cash collection (AC)
Year 1 1,106,000
Year 2 600,000
Year 3 293,000
Year 4 88,000
Year 5 20,800
Year 6 6,800
Year 7 500
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NZ Gazette 2012, No 142
✨ LLM interpretation of page content
💰
Special Determination S23: Transfer of Acquired Bad Debts
(continued from previous page)
💰 Finance & RevenueTax Administration, Bad Debts, Transfer, Consolidated Group, Income Tax Act 2007