Tax adjustments for losses under AIM
Determination A7 (10 Oct 2017) covers tax adjustments for losses under the Accounting Income Method (AIM).
- Under the Accounting Income Method (AIM), taxpayers can calculate their provisional tax payments by using accounting software if that software is in accordance with determinations made under section 91AAX of the Tax Administration Act 1994.
- An AIM-capable accounting system calculates provisional tax using year-to-date accounting income and expenditure adjusted for tax purposes (if required). The purpose of this determination is to detail the tax adjustment for losses to calculate year-to-date net positive accounting income and expenditure, after tax adjustments, for an AIM instalment period.
- A taxpayer is allowed an increase in accounting expenditure on account of a loss balance carried forward under section IA 3(4) of the Income Tax Act 2007. A loss balance carried forward becomes available when the previous tax year’s assessment has been made.
- Grouping of tax losses by companies is not permitted in AIM.
This determination applies for the 2018-19 and later income years.
Tax adjustments: previous assessed year
- This clause requires tax adjustments to the extent to which a person’s accounting income and expenditure does not already accord with the adjustments described in this clause.
- For a person, for the instalment in the current income year in which the date of assessment for the previous tax year falls, the previous tax year’s assessed loss is allowed as a tax adjustment to increase accounting expenditure in that instalment period.
Graeme assesses a loss balance for the 2020-21 tax year of $1m, to be carried forward to the 2021-22 tax year. His assessment is dated 20 December 2021. It occurs part way through the 3rd of 6 instalment periods for his 2021-22 income year.
Graeme has $1m expenditure in his 3rd instalment for his 2021-22 income year.
Tax adjustments: manual and automatic
A tax adjustment under this determination must be made by—
- the user of the accounting software, manually:
- the accounting software, automatically:
- any other means, as appropriate.
Tax adjustments: errors and oversights in previous instalment period
An error or oversight affecting accounting income or expenditure (including income or expenditure adjusted by a determination) for an instalment period in an income year must be corrected by making a tax adjustment in the next instalment period after the one in which the error or oversight is identified.
- In this determination, unless the context otherwise requires,—
instalment period, for a person, means the 2-monthly or monthly period given by schedule 3, part AB of the Income Tax Act 2007 for the applicable instalment date:
previous tax year’s assessed loss is the loss balance carried forward to the tax year corresponding to the current income year from the previous tax year.
- Any word or term that is defined in a Revenue Act and used, but not defined, in this determination has the same meaning as in that Act.
- Examples used in this determination are included in this determination only as interpretational aids. If there is conflict between an interpretational aid and a provision of this determination, the provision prevails.
This determination is made by me, acting under delegated authority from the Commissioner of Inland Revenue under section 7 of the Tax Administration Act 1994.
This determination is signed on the 10th day of October 2017.