This guide explains the associated persons definition for income tax purposes.
The associated persons rules in the Income Tax Act 2007 are designed to ensure the tax treatment of transactions involving associated persons don’t:
- create a tax benefit;
- use the tax system to subsidise the cost of what are effectively private transactions;
- disguise the nature of a business or private transaction; and
- disguise the person(s) involved in the transaction.
Generally, transactions that are non-arm’s length need to be considered under the associated persons rules to ensure that they are treated the same from a tax perspective as if the transaction was made by two independent parties.