You can transfer losses from one company to another if:
- at least 66% of the voting shares in both companies are held by one group of people, and these have not changed hands during the continuity period
- at least 49% of the loss company’s voting shares did not change hands during the continuity period for the loss that's being transferred or the business continuity test is satisfied
- the loss company is either incorporated in New Zealand or is carrying on business in New Zealand through a fixed establishment
- for losses arising before 15 March 2017, the loss company was not treated as non-resident because of a double tax agreement and was not liable to income tax in another country through domicile, residence, or place of incorporation before 15 March 2017
- the loss transferred to the profit company is no greater than the profit company’s net income
- the payment and notification requirements are met.
If your company does not meet the either of the two tests to carry company losses, forward it generally will not be able to offset a loss to another company. However, if the shareholding change occurs part way through a year you may be able to claim the loss.
Carrying company losses forward
To do this, you need to make a part year offset by filing a Companies income tax return - IR4 for the period up to the shareholding change and providing adequate accounts for the part year.
File a Companies income tax return - IR4
Loss offset elections
To make a loss offset election the loss company can complete the appropriate boxes in its IR4 return or send the Commissioner a notice of election.
Loss offset elections need to be filed by the due date for the IR4 that applies to the income year the loss offset election is for. You cannot reverse a loss offset once it has been made.
An election to transfer imputation credits must be sent to us electronically. We need to receive it within the timeframe for electing to enter into a loss grouping transaction.
Subvention payments
Subvention payments are payments by a profit company to a loss company. If the loss company agrees to receive a subvention payment, the profit company’s net income and the loss company’s net loss are reduced by the same amount.
The subvention payment cannot be higher than the loss company's loss. The payment must be made before the due date of the IR4 for the income year the subvention payment relates to.
The payment must be made by 31 March which is the latest date the company could file its income tax return for the income year the subvention payment relates to.