The attribution period is the period over which a MRP attributes its class net income or class net loss.
A MRP may choose an attribution period of:
- a day
- a month
- a quarter, or
- an income year
by giving a notice to the Commissioner before the start of the relevant tax year or when the entity first chooses to become a MRP. The default attribution period for a MRP is a day.
The type of MRP that an entity chooses to become will limit the attribution periods that it may adopt. For instance a quarterly or exit MRP cannot choose an annual attribution period. The following table shows the attribution periods available for the different PIE filing options:
|PIE type||Attribution period|
|Quarterly||day, month or quarter|
|Provisional tax payer||day, month, quarter or annual|
|Annual income tax||not applicable|
A MRP will apply the notified or default investor rate to an attribution period. Where this rate is changed as a result of an investor notifying a change in their prescribed investor rate at any time during the year, the new notified investor rate will apply to any amount for which the tax liability has not already been assessed in a final tax calculation.
A calculation period:
- can consist of 1 or more attribution periods
- under the quarterly option, is a quarter
- under the exit or provisional tax options, is an income year
- under the exit option when an exit period arises, is the exit period.
A MRP therefore cannot elect an attribution period that is greater than the entity's calculation period.
The default calculation period for a MRP is a quarter. However, the entity can choose to have a calculation period of:
- one or more attribution periods e.g. a day (provided they give notice to the Commissioner before the start of the tax year or when they choose to be a MRP), or
- an income year (when the entity elects to be a provisional tax payer and chooses this calculation period by giving a notice to the Commissioner).
The type of MRP that an entity chooses to become will also limit the calculation periods that it may adopt. For instance, an exit MRP must have an attribution and calculation period of a day. The following table shows the calculation periods available for the different PIE filing options:
|PIE type||Calculation period|
|Exit||1 or more attribution periods e.g. a day, exit period or income year|
|Provisional tax payer||income year|
|Annual income tax||not applicable|
Rules applying to PIEs
PIEs attribute income and expenditure on the same basis they use to set their unit price or as shown in their financial statements. The expenditure must ordinarily be deductible for tax purposes.
Timing rule clarification
An amendment to the PIE rules confirms that a multi-rate PIE (MRP) can claim deductions for expenses and pay tax for income when these are reflected in the MRP's valuation of investor interest (unit price) or in its financial statements.
The purpose of this timing rule is to maintain investor equity over time by ensureing that investors exiting the MRP are attributed their correct share of the PIE's tax.
Any future change in an expense or income that has already been deducted or taxed will also be picked up for tax purposes at the point where the change is reflected in the MRP's unit price or financial accounts.
MRPs are able to claim deductions for credit impairment provisions when they're reflected in the MRP's unit price or its financial statements. Credit impairment provisions are created to reflect the decline in a financial assets value because of past events.
A PIE can only claim deductions for credit impairment provisions if the criteria set out in NZIAS 39 are met.
The amendments apply retrospectively from 1 October 2007. However, transitional measures have been included to confirm the tax positions already taken by MRPs on the timing of income and expenses, as well as credit impairment provisions. These transitional measures prevent MRPs from making retrospective adjustments to their tax returns.
Investor attributed income/ investor attributed loss
Investor attributed income or loss for an investor is the total income or loss calculated for that investor for:
- each attribution period in a tax year the investor was present in the entity, and
- each day of the attribution period, and
- each investor class to which the investor belongs.
An investor's investor attributed income or loss mirrors the investor's share of the income on which the entity tax liability is calculated.
A MRP attributes taxable income or taxable loss to investors, calculated for each day in each attribution period, and for each investor class that an investor belongs to on that day using the formula:
|investor fraction x (income - loss)||- (expenses - credits)|
|days in attribution period|
Investor attributed income is treated as excluded income of the investor if:
- the prescribed investor rate (PIR) for the investor is more than 0%, and
- the investor has not notified a rate that is less than the PIR for the income year, and
- a quarterly or an exit MRP calculates its optional payment as a final payment of the entity tax liability on the investor income, and
- income is not attributed to a period that includes part of an exit period, in the case of an exiting investor from a quarterly MRP.
The investor attributed loss for a MRP that elects to be a provisional taxpayer will be zero as MRPs that elect to pay provisional tax do not attribute losses to investors.
Where an exiting investor in a quarterly MRP has an attributed loss for the exit period, the investor can claim the loss as a deduction in their income tax return.
When investor attributed income is attributed to an investor
Investor attributed income is treated as derived by the investor in a MRP in the income year which includes the end of the MRP's income year. For an attributed loss the same rule applies.
Deductions that can be claimed by a PIE when calculating income or loss
Items that are usually deductible on an annual basis for income tax purposes may be claimed and can be attributed to attribution periods in the year.
Income earned on non-vested contributions
Where no investor holds an investor interest in the income or the entitlement is conditional, for example where income is attributed to unvested interests in an employee superannuation scheme, the MRP is treated as the sole investor in the investor class. The income for the purposes of calculating the entity's tax liability is taxed at 28% (reduced from 30% on 1 October 2010).
Superannuation funds may attribute an investor interest to an investor (ie, at the investor's PIR) where:
- an employer-based superannuation scheme existed on or before 17 May 2006 and there has been no increase in the length of the vesting period after that date
- an employer-based superannuation scheme came into existence after 17 May 2006 and the investor interest is transferred from a scheme that existed on or before 17 May 2006 to the new scheme without change in substance to the benefits a member will receive from unvested contributions.
Date published: 05 Apr 2011
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