New measures come into effect from 1 November 2016 with respect to the ability of a New Zealand taxpayer to apply tax losses to a shortfall penalty imposed by the Inland Revenue Department.

Standard Practice Statement SPS 16/04 enables a taxpayer to elect to utilize some or all of a tax loss in a year against a shortfall penalty provided the Commissioner of Inland Revenue is notified by the due date for payment of the penalty.

Losses able to be utilized are restricted to income tax losses only, and these are multiplied by the lowest marginal tax rate that would apply if the taxpayer had tax to pay in the respective year of the tax shortfall.

SPS 16/04 replaces SPS INV-245 Payment of Shortfall Penalty Using Losses, issued 1998.