DO 5 Expenditure on land: planting of listed horticultural plants
When this section applies

(1)

This section applies when—

(a)

a person carries on a farming or agricultural business, including a horticultural business, on land in New Zealand; and

(b)

the land has been developed by the planting of listed horticultural plants on the land.

Deduction and timing

(2)

For an income year in which the planting benefits the business and for which subsection (3) does not apply, the person is allowed a deduction relating to expenditure incurred by the person, or by another person, in developing the land.

Income year in which no deduction

(3)

The person is denied a deduction under subsection (2) for an income year in which—

(a)

if the person owns the land, the person disposes of the land:

(b)

if the person does not own the land, the person ceases carrying on the business on the land.

Amount of deduction other than under subsections (6) and (7)

(4)

For expenditure to which subsections (6) and (7) do not apply for the income year, the amount of the deduction under subsection (2) is calculated using the formula—

rate × diminished value.

Definition of items in formula

(5)

In the formula,—

(a)

rate is the percentage rate determined for the kind of listed horticultural plant by the Commissioner under section 91AAB of the Tax Administration Act 1994:

(b)

diminished value is the diminished value of the expenditure.

Deduction: expenditure on replaced plant if no deduction under section DO 6

(6)

If a listed horticultural plant in a planting of the person ceases in an income year to exist or to be used in deriving assessable income and the person has no deduction under section DO 6 for the income year for the expenditure incurred in replacing the listed horticultural plant,—

(a)

the person is allowed a deduction:

(b)

the amount of the deduction is the diminished value of the expenditure on the listed horticultural plant at the time that the listed horticultural plant ceases to exist or to be used in deriving assessable income:

(c)

the deduction is allocated to the income year in which the listed horticultural plant ceases to exist or to be used in deriving income.

Treatment of expenditure on replaced plant if deduction under section DO 6

(7)

If a listed horticultural plant in a planting of the person ceases in an income year to exist or to be used in deriving assessable income and the person is allowed a deduction under section DO 6 for the income year for all or some of the expenditure incurred in replacing the listed horticultural plant,—

(a)

the person is not allowed a deduction under this section; and

(b)

the person may add the diminished value, immediately before the replacement, of the expenditure on the listed horticultural plant to the diminished values, at the end of the income year, of the expenditure on listed horticultural plants that are in the planting at the end of the income year; and

(c)

the person may choose the method of making the addition by applying the method in a return of income for the income year.

Link with subpart DA

(8)

This section overrides the general permission and the capital limitation. The other general limitations still apply.

Defined in this Act: assessable income, business, capital limitation, deduction, diminished value, general limitation, general permission, income year, listed horticultural plant, planting, return of income

Compare: 2004 No 35 s DO 4B

Section DO 5(4) formula: replaced (with effect on 1 April 2013 and applying for listed horticultural plants that are planted on land on or after the first day of the 2013–14 income year), on 30 June 2014, by section 60(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).