Section EW 63 — Income Tax Act 2007: Cash basis adjustment formula

EW 63 Cash basis adjustment formula Formula (1) A person calculates a cash basis adjustment using the formula— adjusted income − adjusted expenditure − previous income + previous expenditure. Definition of items in formula (2) The items in the formula are defined in subsections (3) to (6). Adjusted income (3) Adjusted income is,— (a) for a person who becomes a cash basis person, 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; and (b) for a person who ceases to be a cash basis person, 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. Adjusted expenditure (4) Adjusted expenditure is,— (a) for a person who becomes a cash basis person, the amount that would have been expenditure incurred by the person under the financial arrangement if they 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; and (b) for a person who ceases to be a cash basis person, the amount that would have been expenditure incurred 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. Previous income (5) Previous income is income derived by the person under the financial arrangement in earlier income years. Previous expenditure (6) Previous expenditure is expenditure incurred by the person under the financial arrangement in earlier income years. Defined in this Act: amount , cash basis person , financial arrangement , income , income year , spreading method , Compare: 2004 No 35 s EW 63