DO 6 Expenditure on land: horticultural replacement planting
When this section applies

(1)

This section applies to a person who carries on a horticultural business on land in New Zealand and who, in an income year (the current income year)—

(a)

plants, or causes to be planted, on the land a listed horticultural plant as a replacement plant:

(b)

regrafts, or causes to be regrafted, a listed horticultural plant on the land as a replacement plant.

Deduction

(2)

The person is allowed a deduction of an amount set out in 1 of subsections (3) and (5) if, in the current income year,—

(a)

the person incurs expenditure in replacing a listed horticultural plant; and

(b)

the replacement plant benefits the business; and

(c)

the person does not dispose of the land on which the listed horticultural plant is cultivated; and

(d)

the person chooses that this section apply to the expenditure by making a return of income for the current income year on that basis.

Amount of deduction if no deduction in 1 or both of 2 preceding income years

(3)

If the person is denied a deduction under this section for 1 or both of the 2 income years preceding the current income year, the amount of the deduction under subsection (2) is calculated using the formula—

replacement expenditure × 7.5% ÷ fraction.

Definition of items in formula

(4)

In the formula in subsection (3),—

(a)

replacement expenditure is the amount of the expenditure incurred by the person in replacing the listed horticultural plant:

(b)

fraction is the greater of 7.5% and the replaced area fraction for the planting for the current income year.

Amount of deduction if deduction in both of 2 preceding income years

(5)

If the person has been allowed a deduction under this section for a planting for both of the 2 income years preceding the current income year, the amount of the deduction under subsection (2) is the lesser of—

(a)

the amount that is calculated using the formula in subsection (6):

(b)

the amount that is calculated using the formula in subsection (8).

Formula for first amount

(6)

The first amount is calculated using the formula—

replacement expenditure × 7.5% ÷ fraction.

Definition of items in formula

(7)

In the formula in subsection (6),—

(a)

replacement expenditure is the amount of the expenditure incurred by the person:

(b)

fraction is the greater of 7.5% and the replaced area fraction for the planting for the current income year.

Formula for second amount

(8)

The second amount is calculated using the formula—

replacement expenditure × (15% − earlier fraction − later fraction)
÷ replaced area fraction.

Definition of items in formula

(9)

In the formula in subsection (8),—

(a)

replacement expenditure is the amount of the expenditure incurred by the person:

(b)

earlier fraction is the lesser of 7.5% and the replaced area fraction for the planting for the earlier of the 2 income years preceding the current income year:

(c)

later fraction is the lesser of 7.5% and the replaced area fraction for the planting for the later of the 2 income years preceding the current income year:

(d)

replaced area fraction is the replaced area fraction for the planting for the current income year.

Timing of deduction

(10)

The deduction is allocated to the current income year.

Link with subpart DA

(11)

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, replaced area fraction, replacement plant, return of income

Compare: 2004 No 35 s DO 4C