Section EW 57 — Income Tax Act 2007: Thresholds

EW 57 Thresholds Income and expenditure threshold (1) For the purposes of section EW 54(1)(a)(i) , this subsection applies if the absolute value of the person’s income and expenditure in the income year under all financial arrangements to which the person is a party is $100,000 or less. Absolute value threshold (2) For the purposes of section EW 54(1)(a)(ii) , this subsection applies if, on every day in the income year, the absolute value of all financial arrangements to which the person is a party added together is $1,000,000 or less. The value of each arrangement is,— (a) for a fixed principal financial arrangement, its face value: (b) for a variable principal debt instrument, the amount owing by or to the person under the financial arrangement: (c) for a financial arrangement to which the old financial arrangements rules apply, the value determined under those rules. Deferral threshold (3) For the purposes of section EW 54(1)(b) , this subsection applies if the result of applying the formula in subsection (4) to each financial arrangement to which the person is a party at the end of the income year and adding the outcomes together is $40,000 or less. Formula (4) The formula is— (accrual income − cash basis income) + (cash basis expenditure − accrual expenditure). Definition of items in formula (5) The items in the formula are defined in subsections (6) to (9). Accrual income (6) Accrual income is the amount that would have been income derived by the person under the financial arrangement if the person had been required to use a spreading method in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. It is calculated using 1 of the following methods, as chosen by the person: (a) the yield to maturity method, whether or not the person may use it, or has chosen to use it, for their financial arrangement; or (b) the straight-line method, whether or not the person may use it, or has chosen to use it, for their financial arrangement; or (c) an alternative method approved by the Commissioner. Cash basis income (7) Cash basis income is the amount that would have been income derived by the person under the financial arrangement if the person had been a cash basis person in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. Cash basis expenditure (8) Cash basis expenditure is the amount that would have been expenditure incurred by the person under the financial arrangement if the person had been a cash basis person in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. Accrual expenditure (9) Accrual expenditure is the amount that would have been expenditure incurred under the financial arrangement if the person had been required to use a spreading method in the period starting on the date on which they became a party to the arrangement and ending on the last day of the income year for which the calculation is made. It is calculated using 1 of the following methods, as chosen by the person: (a) the yield to maturity method, whether or not the person may use it, or has chosen to use it, for their financial arrangement; or (b) the straight-line method, whether or not the person may use it, or has chosen to use it, for their financial arrangement; or (c) an alternative method approved by the Commissioner. Increase in specified sums (10) The Governor-General may make an Order in Council increasing a sum specified in any of subsections (1) to (3). Defined in this Act: absolute value , amount , cash basis person , Commissioner , financial arrangement , fixed principal financial arrangement , income , income year , old financial arrangements rules , spreading method , variable principal debt instrument , Compare: 2004 No 35 s EW 57 Section EW 57(1): amended, on 1 April 2009, by section 11(1) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5). Section EW 57(2): amended, on 1 April 2009, by section 11(2) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5). Section EW 57(3): amended, on 1 April 2009, by section 11(3) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5). Section EW 57(10) heading: added, on 1 April 2009, by section 11(4) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5). Section EW 57(10): added, on 1 April 2009, by section 11(4) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).