Section CB 32C — Income Tax Act 2007: Income for first year of look-through company

CB 32C Income for first year of look-through company Income (1) A person has an amount of income for an income year equal to the amount given by the formula in subsection (3) if the income year is one in which the person has,–– (a) on the first day of that year, an effective look-through interest for a look-through company ( LTC ), and the company existed in the previous income year, but was not a look-through company in that previous year: (b) on the day after a look-through company amalgamates in that year with a company that ceases to exist after the amalgamation (the amalgamating company ), an effective look-through interest for the LTC, and the amalgamating company was not a look-through company immediately before the amalgamation. Exclusion (2) A person does not have income under this section if the income year is 1 of the first or second income year that starts on or after 1 April 2011, and–– (a) the LTC was a qualifying company that first becomes a look-through company for the income year; and (b) subsection (1)(b) does not apply for the income year. Income formula (3) For the purposes of subsection (1), the amount of income is a positive amount calculated using the following formula: untaxed reserves × effective interest. Definition of items in formula (4) In the formula in subsection (3),–– (a) untaxed reserves is the amount given by the formula in subsection (5): (b) effective interest is the person's effective look-through interest for a look-through company on the relevant day under subsection (1)(a) or (b). Untaxed reserves formula (5) For the purposes of subsections (3) and (4), the amount of untaxed reserves is calculated using the following formula: dividends + balances − assessable income − balances − exit exemption. tax rate Definition of items in formula (6) The items in the formula in subsection (5) are defined in subsections (7) to (11). Dividends (7) Dividends is the sum of the amounts that would be dividends if the following events occurred for the company or the amalgamating company (the company ), immediately before it became a look-through company or amalgamated with a look-through company: (a) it disposed of all of its property, other than cash, to an unrelated person at market value for cash; and (b) it met all of its liabilities at market value, excluding income tax payable through disposing of the property or meeting the liabilities; and (c) it was liquidated, with the amount of cash remaining being distributed to shareholders without imputation credits or FDP credits attached. Balances (8) Balances is the sum of the following amounts: (a) the balance in the company's imputation credit account: (b) the balance in the company's FDP account: (c) an amount of income tax payable for an earlier income year but not paid before the relevant date, less refunds due for the earlier income year but paid after the relevant date. Assessable income (9) Assessable income is the total assessable income that the company would derive by taking the actions described in subsection (7)(a) and (b) less the amount of any deduction that the company would have for taking those actions. Tax rate (10) Tax rate is the basic tax rate for the income year of the company that contains the relevant day described in subsection (12). Exit exemption (11) Exit exemption is the amount given by the formula in section CX 63(2) (Dividends derived after ceasing to be look-though company), treating the amount described in subsection (7) as a dividend paid by the company for the purposes of section CX 63(1), if section CX 63 would apply to a dividend paid by the company. Relevant day (12) In subsections (7) to (9) and (11), the relevant day for measuring items in the formula is— (a) the last day of the income year before the income year described in subsection (1)(a), as applicable; or (b) the day of the amalgamation described in subsection (1)(b) as applicable. Income tax and refund (13) For the purposes of subsection (8)(c),— (a) income tax payable is income tax that would, when paid, give rise to a credit in the company's imputation credit account under sections OB 4 to OB 29 (which relate to imputation credits): (b) a refund of income tax due is the amount that would, when paid, give rise to a debit to the company's imputation credit account under sections OB 30 to OB 59 (which relate to imputation debits). Defined in this Act: amalgamating company , amalgamation , amount , assessable income , basic tax rate , company , deduction , dispose , dividend , effective look-through interest , FDP account , FDP credit , imputation credit , imputation credit account , income , income tax , income year , liquidation , look-through company , qualifying company Section CB 32C: inserted, on 1 April 2011 (applying for income years beginning on or after 1 April 2011), by section 26(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).