20G Treatment of supplies of certain assets


A registered person who uses an asset described in section DG 3 of the Income Tax Act 2007 for making taxable supplies has a deduction under section 20(3)(hb) of an amount calculated using the formula—

input tax for asset × total income-earning days ÷ (total income-earning days + total private days).


In the formula,—


input tax for asset is the input tax on expenditure that the person incurs in relation to the use of the asset, other than expenditure that is—


related solely to the income-earning use of the asset as described in section DG 7 of that Act; or


related solely to the private use of the asset, as that term is defined in section DG 4 of that Act:


total income-earning days is the total number of days in the period on which the person supplies the asset for use and derives consideration for the supply, whether at, above, or below market value as that term is defined in section DG 3(5) of that Act, including any days on which—


the use made of the asset is described in section DG 4(3) to (5) of that Act:


the asset has become unavailable for use because another person who had earlier reserved the asset for their own use, subsequently did not take advantage of that reservation:


a fringe benefit tax liability arises:


total private days is the total number of days in the period on which the asset is in active use as described in section DG 3(7) of that Act and the day is not an income-earning day as described in paragraph (b).


A unit of measurement of time other than days, whether relating to hours, or nights, or anything else is to be used in the formula and in subsection (2)(b) and (c), if the use of the unit provides a fair and reasonable result. For this purpose, the same unit must be used in relation to both total income-earning days and total private days.


The person must ascertain at the end of an adjustment period whether an adjustment is required to be made for any percentage difference in a supply of the asset for the period in relation to the actual use of the asset for making taxable supplies.


If an adjustment is required, the person must, at the end of the adjustment period,—


identify the percentage actual use of the asset in accordance with the formula in subsection (1) for making taxable supplies; and


compare the percentage actual use with percentage intended use as described in section 20(3JB) or previous actual use, as applicable; and


if a percentage difference arises, make an adjustment for any percentage difference for the adjustment period, applying section 21D(3) to the resulting amount.


For the purposes of subsection (5), all expenditure incurred in relation to the use of the asset is aggregated and included in the relevant adjustment unless section 21(2)(c) or (d) applies to the aggregated amount.


Sections 8 and 21F apply to the disposal of the asset, treating the disposal as in the course or furtherance of a taxable activity.


For the purposes of this section, a registered person does not include a widely-held company, as that term is defined in section YA 1 of the Income Tax Act 2007.

Section 20G: inserted (with effect on 1 April 2013, applying in relation to supplies of goods other than land or improvements to land made on or 1 April 2014; for supplies of land or improvements to land, applying from 17 July 2013), on 17 July 2013, by section 131 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).