Section IZ 1 — Income Tax Act 2007: Use of specified activity net losses

IZ 1 Use of specified activity net losses Limit on amount (1) A person’s specified activity net loss that is carried forward to a tax year and subtracted from the person’s net income for the tax year must be no more than the sum of the net income for the tax year from the conduct of the same specified activity that gave rise to the net loss and $10,000. If the person makes the net loss available to another person, the maximum amount that can be subtracted by the other person is $10,000. When person conducts 2 or more specified activities (2) For the purposes of subsection (1), if the specified activity net loss arises from the conduct of 2 or more specified activities— (a) the amount subtracted from the net income for the tax year must be no more than the lesser of— (i) the sum of the person’s specified activity net income from each of the specified activities; and (ii) $10,000; and (b) the person may choose by notice which amounts of net income from the specified activities to subtract from their net income. When 2 or more persons conduct specified activity (3) If 2 or more persons conduct a specified activity, this section applies as if every reference to— (a) a person were a reference to each person; and (b) an amount of specified activity net loss attributable to the conduct of the specified activity were a reference to the amount of each person’s share of the amount of any joint specified activity net loss for the tax year. Income from personal exertion and hardship (4) The Commissioner may determine that the limit under subsection (1) does not apply, and may increase the amount of specified activity net loss that may be subtracted from a person’s net income under that subsection if— (a) the person is engaged mainly in conducting a specified activity as their livelihood, and they derive income from personal exertion that— (i) is derived as a result of the conduct of the specified activity but is not income from the specified activity; and (ii) is made for the purpose of enabling the person to meet expenditure essential for the maintenance of either them and their dependants or for the continuation of the specified activity; and (b) the person, in the opinion of the Commissioner would suffer hardship from the application of subsections (1) to (3). Relationship with general loss rules (5) Subparts IA , IC , ID , IE , and IP (which relate to the general use of tax losses) apply to a specified net loss except to the extent to which subsections (1) to (3) override them. Established activities excluded (6) This section does not apply to a specified activity net loss that relates to an established activity. Related activities (7) A specified activity is related to another specified activity, and is treated as part of the other specified activity, if— (a) it is usually conducted in association with and is complementary to the other specified activity that an existing farmer is already conducting; or (b) it is conducted on land that an existing farmer has owned or held under lease, licence, or other agreement for 5 years before the activity is started and— (i) the existing farmer is carrying on the other specified activity immediately before the related activity is started; or (ii) the existing farmer elects by notice in their return of income for the tax year in which they start the activity to have the activity treated as related; or (iii) the Commissioner determines the activity is related. Modification for specified activity (8) If this section would have a more favourable effect if the following words in paragraph (c)(ii) of the definition of specified activity in section YA 1 (Definitions) were omitted, this section applies as if those words were omitted: “ not including crops for which the preparation of the land, the planting and cultivation of the tree or plant, and the harvesting of the crop are accomplished within 12 months ” . When subsections (10) and (11) apply (9) Subsections (10) and (11) apply for the purposes of the definition of established activity in subsection (12) when— (a) land is transferred under a settlement of relationship property; and (b) the transferor conducted a specified activity on the land as at 1 October 1982, and the conduct of the activity constituted their livelihood or sole source of income; and (c) the transferee conducts the same specified activity on the land. Treatment of transferee (10) The transferee is treated as continuing the specified activity, and that activity is treated as constituting their livelihood and sole source of income. Date of commencement (11) For the purposes of subsection (7), if the transferor was an existing farmer immediately before the date of transfer, the transferee is treated as having acquired the land on the date it was acquired by the transferor. However, if the transferee starts to conduct the same kind of specified activity on the land that the transferor conducted immediately before the date of transfer, the transferee is not treated as having acquired the land on that date. Some definitions (12) In this section,— conduct means carry on or engage in or hold an interest in a specified activity, whether or not jointly with another person established activity , for a person who is an existing farmer, means a specified activity, except an activity within the meaning of paragraph (j) of the definition of specified activity in section YA 1 , that the person conducted on 11 October 1982, if the Commissioner considers the conduct of the specified activity constituted the livelihood of the person and their principal source of income existing farmer means a person to whom both the following apply: (a) the person conducts in an income year 1 or more of the specified activities described in paragraphs (a) to (i) of the definition of specified activity ; and (b) the person’s livelihood and the person’s sole or principal source of income is constituted, throughout the conduct of the specified activity or the specified activities in the income year, by the conduct of the specified activity or the specified activities income from personal exertion means income of a kind referred to in sections CB 1 and CE 1 (which relate to amounts derived from business and in connection with employment), but does not include income from a business of renting, or lending money, or making financial investments land ,— (a) includes a lease, or an interest under a lease, of a leased area as defined in the Marine Farming Act 1971; and (b) includes a licence, or an interest under a licence, relating to a licensed area as defined in the Marine Farming Act 1971; and (c) includes an improvement on or in relation to the leased area or the licensed area to which a lease or licence under the Marine Farming Act 1971 relates related activity , for a specified activity conducted by a person in a tax year, means another specified activity that is treated as a related activity under subsection (7), whether or not it is conducted on the same land as the specified activity specified activity means— (a) the business of animal husbandry, including bee-keeping, the breeding of horses other than bloodstock, and poultry-keeping: (b) otherwise deriving income from livestock including bees, horses other than bloodstock, and poultry: (c) the business of growing trees or plants— (i) for sale as growing trees or plants; or (ii) for the production of flowers; or (iii) for the production of fruit other than grapes, seeds, vegetables, or other crops, not including crops for which the preparation of the land, the planting and cultivation of the tree or plant, and the harvesting of the crop are accomplished within 12 months: (d) the business of viticulture: (e) the business of freshwater fish farming: (f) the business of mussel farming: (g) the business of rock oyster farming: (h) the business of scallop farming: (i) the business of sea-case salmon farming: (j) acquiring or holding of land with a view to deriving, from some or all of the land, rents or other revenues from a lease, licence, or other agreement relating to the land specified activity net income means, for a specified activity conducted by a person in a tax year, the result of subtracting from the sum of the income of the person allocated to that activity and the tax year the sum of the deductions of the person allocated to that activity and the tax year, if that result is a positive amount specified activity net loss means, for a specified activity conducted by a person in a tax year preceding the 1986–87 tax year in the case of an activity referred to in paragraphs (a) to (i) of the definition of specified activity in section YA 1 , and the 1990–91 tax year in the case of an activity referred to in paragraph (j) of that definition, a loss from that specified activity referred to in section 188A of the Income Tax Act 1976. Defined in this Act: amount , business , Commissioner , conduct , deduction , established activity , existing farmer , income , income from personal exertion , land , net income , notice , related activity , return of income , settlement of relationship property , specified activity , specified activity net income , specified activity net loss , tax year , Compare: 2004 No 35 ss FF 18 , IE 2