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Income Tax Act 2007
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Income Tax Act 2007
| Public Act | 2007 No 97 |
| Date of assent | 1 November 2007 |
Contents
BD 1 Income, exempt income, excluded income, nonresidents' foreign-sourced income, and assessable income
Exclusions for residential land
Exclusions for business premises
CD 33 Payments corresponding to notional distributions of producer boards and co-operative companies
Attributed repatriation calculation rules
Restrictive covenants and exit inducement payments
Matching rules: revenue account property, prepayments, and deferred payments
Avoidance and non-market transactions
Interest apportionment on thin capitalisation
Attributed controlled foreign company income
Foreign investment fund income
Transfers to or from superannuation funds and superannuation schemes
Treatment of amounts when superannuation fund becomes superannuation scheme or vice versa
Treatment of distributions when superannuation fund wound up
Income from business or trade-like activities
CW 1 Forestry companies established by the Crown, Maori owners, and holding companies buying land with standing timber from founders
Income from holding property (excluding equity)
Certain income of transitional resident
Income from living allowances, compensation, and government grants
Income from certain activities
CX 55 Proceeds from certain disposals by portfolio investment entities or New Zealand Superannuation Fund
CX 56 Portfolio investor allocated income and distributions of income by portfolio investment entities
Transactions between companies in consolidated groups
CZ 5 Exempt interest: overseas money lent to government or local or public authority before 29 July 1983
CZ 13 Treatment of units and interests in unit trusts and group investment funds on issue as at 1 April 1996
Financial arrangements adjustments
Matching rules: revenue account property, prepayments, and deferred payments
DB 49 Adjustment for opening values of trading stock, livestock, and excepted financial arrangements
Use of motor vehicle under certain arrangements
DB 56 Expenditure incurred in operating motor vehicle under agreement or arrangement affected by section CX 7
Payments to spouses, civil union partners, or de facto partners
Avoidance and non-market transactions
Attributed controlled foreign company (CFC) loss
Foreign investment fund (FIF) loss
DP 8 Forestry business on land bought from the Crown, Maori owners, or holding company: no deduction
DP 9 Cost of acquiring timber: forestry business on land bought from the Crown, Maori owners, or holding company
Petroleum exploration expenditure
Petroleum development expenditure
DV 14 Amalgamated company: expenditure on improvements for farming, horticultural, aquacultural, and forestry businesses
Valuation of specified livestock
Valuation of non-specified livestock
Valuation of high-priced livestock
Meaning of depreciable property
How amounts of depreciation loss and depreciation recovery income are calculated
Amount of depreciation loss under diminishing value method or straight-line method
Amount of depreciation loss under pool method
EE 25 Depreciation loss for plant variety rights application granted in 2005–06 or later income year
Improvements, items of low value, or items no longer used
Transfers of depreciable property: associated persons and certain amalgamations
Main income equalisation scheme
Adverse event income equalisation scheme
Thinning operations income equalisation scheme
Refunds: general provisions, and tax credits
EH 77 Sections of main income equalisation scheme that apply to thinning operations income equalisation scheme
Research, development, and resulting market development
Meaning of financial arrangement and excepted financial arrangement
Application of financial arrangements rules
Calculation and allocation of income and expenditure over financial arrangement’s term
Consideration when financial arrangement involves property or services
EW 32 Consideration for agreement for sale and purchase of property or services, hire purchase agreement, specified option, or finance lease
Consideration treated as paid to person
Consideration treated as paid by person
Consideration when legal defeasance has occurred
Consideration when anti-avoidance provision applies
Income and deduction provisions specifically related to financial arrangements
Treatment of original share acquired under financial arrangement
Application of financial arrangements rules to cash basis persons
Controlled foreign company (CFC) rules
When is a company a controlled foreign company?
Calculation of person’s control interest
Calculation of person’s income interest
Ten percent threshold and variations in income interest level
Calculation of attributed CFC income or loss
Calculation of branch equivalent income or loss
Change of residence of companies
Ownership measurement concession
Anti-avoidance rule: stapled stock
Foreign investment fund (FIF) rules
What is a foreign investment fund?
Calculation of FIF income or loss
Relationship with other provisions in Act
EX 59 Codes: comparative value method, deemed rate of return method, fair dividend rate method, and cost method
Cases of entry into and exit from FIF rules
Commissioner’s default assessment power
EY 19 Premium loading formulas: when life insurers not providing life insurance at start of income year
EY 29 Mortality profit formula: when life insurers not providing life insurance at start of income year
EZ 11 Amounts of depreciation recovery income and depreciation loss for part business use up to 2004–05 income year
EZ 12 Amount of depreciation loss for item acquired from associated person on or before 23 September 1997
EZ 13 Annual rate for item acquired on or after 1 April 1993 and before end of person’s 1994–95 income year
EZ 18 Section EZ 17 amount of depreciation loss when items transferred between companies in wholly-owned group before 1 April 1993
EZ 19 Section EZ 17 amount of depreciation loss when person previously exempt from tax acquires item
EZ 23 Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005
Controlled foreign company and foreign investment fund rules
Old financial arrangements rules
EZ 47 Election to continue to treat certain excepted financial arrangements as financial arrangements
EZ 49 Determination of core acquisition price where consideration for property denominated in foreign currency
Exceptions for property transferred on death of person
Debt percentage of New Zealand group
Debt percentage of worldwide group
Determining membership of groups
Measuring ownership interests in companies
Membership and debt percentages of foreign groups
Calculating taxable income for consolidated group returns
Accounting for particular property
Treatment of foreign dividends
Membership of consolidated groups
Forming, joining, or leaving consolidated groups
When membership starts and stops
Treatment of shares, income, expenditure, and bad debts
Property passing to amalgamated company on amalgamation
Treatment of financial arrangements between amalgamating companies
Arrangements involving dividend stripping
Arrangements involving transfer pricing
Arrangements involving tax losses
Arrangements to defeat continuity provisions
Arrangements involving qualifying companies
Arrangements involving controlled foreign companies
Arrangements involving foreign investment funds
Arrangements involving film rights
Arrangements involving petroleum mining
Arrangements involving financial arrangements
Arrangements involving trust beneficiary income
Arrangements involving repatriation of commercial bills
Attribution rule for income from personal services
Arrangements involving restrictive covenants
Arrangements involving fringe benefit tax
Arrangements involving depreciation loss
Arrangements involving imputation rules
Arrangements involving foreign dividends
Arrangements involving Maori authority credits
Arrangements involving family support credits
Arrangements involving money not at risk
Arrangements involving returning share transfers
Disposals of trading stock or similar property
Treatment of profits, dividends, and tax losses
Special tax matters for loss-attributing qualifying companies
Elections: qualifying companies
Elections: loss-attributing qualifying companies
Qualifying company election tax
Effective interests in qualifying companies
Tax treatment of amounts that beneficiaries derive from trusts
Tax treatment of trustee income
Settlors and their liabilities
Treatment of transition situations
Valuation of property, trading stock, and financial arrangements
Rate and payment of income tax
Eligibility requirements: portfolio investment entities and foreign investment vehicles
Becoming and ceasing to be portfolio investment entity
Periods relevant to calculation of portfolio entity tax liability
Allocation of income in some cases
Calculating portfolio entity tax liability
HL 20 Portfolio class taxable income and portfolio class taxable loss for portfolio allocation period
Payment by portfolio tax rate entity of tax for tax year
HL 27 Treatment of portfolio investor allocated loss for zero-rated portfolio investors and investors with portfolio investor exit period
Treatment of losses for entity
Partnerships and joint ventures
Tax loss components carried forward
Tax credits for persons on low incomes
Tax credits for transitional circumstances
Adjustments to certain tax credits
Use of credits in later tax years
Treatment of taxable distributions
Supplementary dividend holding companies
Underlying foreign tax credits
Credits for certain non-resident investment companies
Credits for interest on home vendor mortgages
Credits for savings in special home ownership accounts
Shareholder continuity requirements
Treatment of credits and debits on resident’s restricted amalgamation
Amalgamation of companies in consolidated groups
Imputation credits attached to dividends
Distributions of statutory producer boards and co-operative companies
Tables of credits and debits in memorandum accounts
FDP credits attached to dividends
CTR credits attached to dividends
Table O5: conduit tax relief credits
Table O6: conduit tax relief debits
Companies with branch equivalent tax accounts
Persons with branch equivalent tax accounts
Table O7 branch equivalent tax credits
Table O8 branch equivalent tax debits
Table O9 person's equivalent tax credits
Table O10 person's equivalent tax debits
Companies with policyholder credit accounts
Policyholder credits of PCA company
Policyholder debits of PCA company
Persons with policyholder credit accounts
Policyholder credits of PCA person
Policyholder debits of PCA person
Table O13 policy holder credits
Table O15 person's policyholder credits
Table O16 person's policyholder debits
Maori authority credits attached to distributions
Table O17 Maori authority credits
Table O18 Maori authority debits
Consolidated groups and imputation credit accounts
Imputation credits of consolidated imputation groups
Imputation debits of consolidated imputation groups
Table O19 imputation credits of consolidated imputation groups
Table O20 imputation debits of consolidated imputation groups
Consolidated groups and FDP accounts
FDP credits of consolidated FDP groups
FDP debits of consolidated FDP groups
Table O21 : credits of consolidated FDP groups
Table O22 : FDP debits of consolidated FDP groups
Consolidated groups and CTR credits
CTR credits of consolidated groups
CTR debits of consolidated groups
Consolidated groups’ FDP payments and refunds
Table O23 : conduit tax relief credits of consolidated groups
Table O23 : conduit tax relief debits of consolidated groups
Consolidated groups and branch equivalent tax accounts
Branch equivalent tax credits of consolidated BETA groups
Branch equivalent tax debits of consolidated BETA groups
Table O25 : branch equivalent tax credits of consolidated BETA groups
Table O26 : branch equivalent tax debits of consolidated BETA groups
Consolidated groups and policyholder credit accounts
Policyholder credits of consolidated groups
Policyholder debits of consolidated groups
Payment and withholding obligations
Application of other provisions
Calculating provisional tax liability
Instalments of provisional tax
Requirements for using GST ratio
When persons start or stop paying GST, or change taxable periods
Treatment of groups of companies and amalgamated companies
Attribution rule for income from personal services
PAYE rules and PAYE income payments
Adjustments for certain PAYE income payments
Fringe benefit tax (FBT) rules and fringe benefits
Attributing fringe benefits to employees
Taxable value of fringe benefits
Employer’s superannuation contribution tax (ESCT) rules and employer’s superannuation contributions
Tax on certain withdrawals from superannuation funds
Limits on refunds and transfers
Companies receiving foreign dividends
Persons with policyholder credit accounts
Certain unit trusts and group investment funds
Obligations and treatment of PAYE intermediaries
PAYE intermediaries’ responsibilities
YA 3 Treatment of qualifying company election tax, FBT, FDP penalty tax, imputation penalty tax, and withdrawal tax
Table Y1 Associated person rules
Voting and market value interests
Voting and market value interests: modifications for continuity provisions
The Parliament of New Zealand enacts as follows:
Part D
Deductions
Subpart DA—General rules
DA 1 General permission
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Nexus with income
(1) A person is allowed a deduction for an amount of expenditure or loss, including an amount of depreciation loss, to the extent to which the expenditure or loss is—
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(a) incurred by them in deriving—
(i) their assessable income; or
(ii) their excluded income; or
(iii) a combination of their assessable income and excluded income; or
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(b) incurred by them in the course of carrying on a business for the purpose of deriving—
(i) their assessable income; or
(ii) their excluded income; or
(iii) a combination of their assessable income and excluded income.
General permission
(2) Subsection (1) is called the general permission.
Avoidance arrangements
(3) Section GB 33 (Arrangements involving depreciation loss) may apply to override the general permission in relation to an amount of depreciation loss.
Defined in this Act: amount, assessable income, business, deduction, depreciation loss, excluded income, general permission, loss,
Compare: 2004 No 35 s DA 1
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DA 2 General limitations
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Capital limitation
(1) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a capital nature. This rule is called the capital limitation.
Private limitation
(2) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is of a private or domestic nature. This rule is called the private limitation.
Exempt income limitation
(3) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving exempt income. This rule is called the exempt income limitation.
Employment limitation
(4) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving income from employment. This rule is called the employment limitation.
Withholding tax limitation
(5) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving non-resident passive income of the kind referred to in section RF 2(3) (Non-resident passive income). This rule is called the withholding tax limitation.
Non-residents’ foreign-sourced income limitation
(6) A person is denied a deduction for an amount of expenditure or loss to the extent to which it is incurred in deriving non-residents’ foreign-sourced income. This rule is called the non-residents’ foreign-sourced income limitation.
Relationship of general limitations to general permission
(7) Each of the general limitations in this section overrides the general permission.
Defined in this Act: amount, capital limitation, deduction, employment limitation, exempt income, exempt income limitation, general limitation, general permission, income from employment, loss, non-residents’ foreign-sourced income, non-residents’ foreign-sourced income limitation, private limitation, withholding tax limitation,
Compare: 2004 No 35 s DA 2
DA 3 Effect of specific rules on general rules
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Supplements to general permission
(1) A provision in any of subparts DB to DZ may supplement the general permission. In that case, a person to whom the provision applies does not have to satisfy the general permission to be allowed a deduction.
Express reference needed to supplement
(2) A provision in any of subparts DB to DZ takes effect to supplement the general permission only if it expressly states that it supplements the general permission.
Relationship of general limitations to supplements to general permission
(3) Each of the general limitations overrides a supplement to the general permission in any of subparts DB to DZ, unless the provision creating the supplement expressly states otherwise.
Relationship between other specific provisions and general permission or general limitations
(4) A provision in any of subparts DB to DZ may override any 1 or more of the general permission and the general limitations.
Express reference needed to override
(5) A provision in any of subparts DB to DZ takes effect to override the general permission or a general limitation only if it expressly states that—
(a) it overrides the general permission or the relevant limitation; or
(b) the general permission or the relevant limitation does not apply.
Part E
(6) No provision in Part E (Timing and quantifying rules) supplements the general permission or overrides the general permission or a general limitation.
Defined in this Act: deduction, general limitation, general permission, supplement,
Compare: 2004 No 35 s DA 3
DA 4 Treatment of amount of depreciation loss
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The capital limitation does not apply to an amount of depreciation loss merely because the item of property is itself of a capital nature.
Defined in this Act: amount, capital limitation, depreciation loss,
Compare: 2004 No 35 s DA 4
Subpart DB—Specific rules for expenditure types
Taxes
DB 1 Taxes, other than GST, and penalties
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No deduction
(1) A person is denied a deduction for the following:
(a) income tax:
(b) a tax imposed in a country or territory outside New Zealand that is substantially the same as income tax:
(c) ancillary tax, unless listed in subsection (2):
(d) a civil penalty under Part 9 of the Tax Administration Act 1994:
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(e) a tax, a penalty, or interest on unpaid tax that is—
(i) payable under the laws of a country or territory outside New Zealand; and
(ii) substantially the same as a civil penalty as defined in section 3(1) of the Tax Administration Act 1994, or a criminal penalty under Part 9 of the Act, or interest imposed under Part 7 of the Act.
Some ancillary tax excluded
(2) Subsection (1) does not apply to—
(a) pay-as-you-earn (PAYE):
(b) fringe benefit tax (FBT):
(c) employer’s superannuation contribution tax (ESCT):
(d) resident withholding tax (RWT):
(e) non-resident withholding tax (NRWT).
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: ancillary tax, deduction, ESCT, FBT, general permission, income tax, New Zealand, NRWT, pay, PAYE, RWT, tax,
Compare: 2004 No 35 s DB 1
DB 2 Goods and services tax
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No deduction
(1) A registered person is denied a deduction for the following:
(a) input tax on a supply of goods or services to them:
(b) goods and services tax (GST) payable by them to the Commissioner.
Deduction
(2) A registered person is allowed a deduction for output tax on a supply of goods or services that section 21 or 21I(1) to 21I(3) of the Goods and Services Tax Act 1985 treats them as making, but only to the extent to which—
(a) they are allowed a deduction for expenditure that they incur in acquiring or producing the goods or services; or
(b) they are allowed a deduction for an amount of depreciation loss for the goods or services.
Exclusion
(3) Subsection (2) does not apply to an amount that relates to the application of a capital asset—
(a) for the principal purpose of making taxable supplies, when the asset was acquired or produced other than for the principal purpose of making taxable supplies; or
(b) other than for the principal purpose of making taxable supplies, when the asset was acquired or produced for the principal purpose of making taxable supplies; or
(c) other than for the purpose of deriving income.
Depreciable property
(4) The provisions that apply when an amount of depreciation loss is quantified by reference to the cost of an item of depreciable property to a person are in section EE 54 (Cost: GST).
Link with subpart DA
(5) The link between this section and subpart DA (General rules) is as follows:
(a) subsection (1) overrides the general permission:
(b) subsection (2) supplements the general permission; the general limitations still apply.
Defined in this Act: amount, Commissioner, deduction, depreciable property, depreciation loss, general limitation, general permission, goods, GST, GST payable, income, input tax, output tax, pay, registered person, services, supplement, taxable supply,
Compare: 2004 No 35 s DB 2
DB 3 Determining tax liabilities
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Deduction
(1) A person is allowed a deduction for expenditure that they incur in connection with the following matters:
(a) calculating or determining their income tax liability for a tax year:
(b) calculating or determining the GST payable by them in a taxable period:
(c) preparing, instituting, or presenting an objection or challenge to, or an appeal following, a determination or assessment made under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985:
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(d) making a contribution towards the expenditure incurred by another person if—
(i) the other person is allowed a deduction for that expenditure; and
(ii) the expenditure relates to a matter affecting the determination of the first person’s liability for income tax or GST; and
(iii) the first person has objected to, challenged, or appealed against an assessment or determination made in relation to the matter under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985.
Exclusions
(2) This section does not apply to expenditure that a person incurs in connection with the following matters:
(a) a matter arising from a return of income or a return under the Goods and Services Tax Act 1985 that was fraudulent or wilfully misleading:
(b) an offence under any of the Inland Revenue Acts:
(c) a shortfall penalty assessed under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985 (but not an assessment that is later cancelled):
(d) an objection, challenge, or appeal that is inconsequential or frivolous:
(e) a matter arising under the Goods and Services Tax Act 1985 to the extent to which it relates to a taxable activity that does not constitute a business for the purposes of this Act.
Taxable activity
(3) In this section, taxable activity is defined in section 6 of the Goods and Services Tax Act 1985.
Link with subpart DA
(4) This section supplements the general permission and overrides the private limitation and the employment limitation. The other general limitations still apply.
Defined in this Act: amount, assessment, business, deduction, employment limitation, general limitation, general permission, GST, GST payable, income tax liability, Inland Revenue Acts, pay, private limitation, return of income, supplement, tax year, taxable activity, taxable period,
Compare: 2004 No 35 s DB 3
DB 4 Chatham Islands dues
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Deduction
(1) A person is allowed a deduction for expenditure incurred on dues levied under the Chatham Islands Council Act 1995 that relate to goods that the person uses in connection with carrying on a business.
Timing of deduction
(2) The deduction is allocated to the income year in which the dues are paid.
Exclusion of expenditure: other deductions
(3) Expenditure to which subsection (1) applies must not be taken into account in calculating the cost of the goods for the purpose of a deduction relating to the goods under any other provision of this Act.
Link with subpart DA
(4) The link between this section and subpart DA (General rules) is as follows:
(a) subsection (1) supplements the general permission and overrides the capital limitation; the other general limitations still apply:
(b) subsection (3) overrides the general permission.
Defined in this Act: business, capital limitation, deduction, general permission, general limitation, income year, pay, supplement,
Compare: 2004 No 35 s DB 4
Financing costs
DB 5 Transaction costs: borrowing money for use as capital
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Deduction
(1) A person is allowed a deduction for expenditure incurred in borrowing money that is used as capital in deriving their income.
Link with subpart DA
(2) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income,
Compare: 2004 No 35 s DB 5
DB 6 Interest: not capital expenditure
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Deduction
(1) A person is allowed a deduction for interest incurred.
Exclusion
(2) Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1.
Conduit financing arrangements
(3) Section LL 7 (Conduit financing arrangements) may apply to limit a deduction under this section.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, interest,
Compare: 2004 No 35 s DB 6
DB 7 Interest: most companies need no nexus with income
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Deduction
(1) A company is allowed a deduction for interest incurred.
Exclusion: qualifying company
(2) Subsection (1) does not apply to a qualifying company.
Exclusion: exempt income
(3) If a company (company A) derives exempt income or another company (company B) that is part of the same wholly-owned group of companies derives exempt income, subsection (1) applies to company A only if all the exempt income is 1 or more of the following:
(a) dividends; or
(b) income exempted under section CW 58 (Disposal of companies’ own shares); or
(c) income exempted under section CW 60 (Stake money) and ancillary to the company’s business of breeding.
Exclusion: non-resident company
(4) If a company is a non-resident company, subsection (1) applies only to the extent to which the company incurs interest in the course of carrying on a business through a fixed establishment in New Zealand.
Exclusion: interest related to tax
(5) Subsection (1) does not apply to interest for which a person is denied a deduction under section DB 1.
Consolidated groups
(6) Section FM 12 (Expenditure when deduction would be denied to consolidated group) may apply to allow a deduction under this section to a company that is part of a consolidated group.
Conduit financing arrangements
(7) Section LL 7 (Conduit financing arrangements) may apply to limit a deduction under this section.
Link with subpart DA
(8) This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply.
Defined in this Act: business, capital limitation, company, consolidated group, deduction, dividend, exempt income, exempt income limitation, fixed establishment, general limitation, general permission, income, interest, New Zealand, non-resident company, qualifying company, supplement, wholly-owned group of companies, withholding tax limitation,
Compare: 2004 No 35 s DB 7
DB 8 Interest: money borrowed to acquire shares in group companies
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Deduction: borrowing to acquire group company shares
(1) A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that is part of the same group of companies.
Exclusion: group not in existence at year end
(2) Subsection (1) does not apply if the 2 companies are not part of the same group of companies at the end of the tax year that corresponds to the income year in which the deduction is allowed.
Deduction: interest after resident’s restricted amalgamation
(3) A company is allowed a deduction for interest incurred on money borrowed to acquire shares in another company that has ended its existence on a resident’s restricted amalgamation.
Exclusion: group not in existence immediately before resident’s restricted amalgamation
(4) Subsection (3) does not apply if the 2 companies were not part of the same group of companies immediately before the resident’s restricted amalgamation.
Application from income year of resident’s restricted amalgamation
(5) Subsection (3) applies in the income year in which the resident’s restricted amalgamation occurs and in later income years.
Consolidated groups
(6) Section FM 12 (Expenditure when deduction would be denied to consolidated group) may apply to allow a deduction under this section to a company that is part of a consolidated group.
Conduit financing arrangements
(7) Section LL 7 (Conduit financing arrangements) may apply to limit a deduction under this section.
Link with subpart DA
(8) This section supplements the general permission and overrides the capital limitation, the exempt income limitation, and the withholding tax limitation. The other general limitations still apply.
Defined in this Act: company, consolidated group, deduction, exempt income limitation, general limitation, general permission, group of companies, income year, interest, resident’s restricted amalgamation, share, supplement, withholding tax limitation,
Compare: 2004 No 35 s DB 8
DB 9 Interest incurred on money borrowed to acquire shares in qualifying companies
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Deduction for interest incurred
(1) The deduction that a shareholder in a qualifying company has for interest in an income year is reduced by the amount of non-cash dividends, other than taxable bonus issues, derived by them or an associated person from the company in the income year.
Exempt income
(2) In determining the amount of the deduction that the shareholder has for the interest, section CW 15(1) (Dividends paid by qualifying companies) does not apply to treat as exempt income a distribution from the qualifying company to the shareholder, and the distribution is excluded from the definition of dividend.
Associated persons
(3) If the associated person referred to in subsection (1) is associated with more than 1 shareholder in the company, the amount of non-cash dividends is apportioned among the associated shareholders according to their effective interests in the company in the income year.
Allocation of dividend
(4) If section CD 39 (Calculation of amount of dividend when property made available) applies to a dividend derived by a shareholder of a qualifying company, the dividend is treated as having been paid and derived at the end of the quarter in which the amount is calculated.
Link with subpart DA
(5) This section overrides—
(a) the general permission; and
(b) the exempt income limitation.
Defined in this Act: amount, associated person, bonus issue, deduction, dividend, effective interest, exempt income, exempt income limitation, general permission, income year, interest, non-cash dividend, pay, qualifying company, share, shareholder, taxable bonus issue,
Compare: 2004 No 35 s HG 9(3)–(5)
DB 10 Interest or expenditure connected to profit-related or substituting debentures
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When this section applies
(1) This section applies for the purposes of section FA 2 (Recharacterisation of certain debentures).
No deduction
(2) A company issuing either a profit-related debenture or a substituting debenture is denied a deduction for—
(a) interest payable under the debenture; or
(b) expenditure or loss incurred in connection with the debenture; or
(c) expenditure or loss incurred in borrowing the money secured by or owing under the debenture.
Relationship with sections DB 5 to DB 8
(3) This section overrides sections DB 5 to DB 8.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: debenture, deduction, general permission, interest, pay, profit-related debenture, substituting debenture,
Compare: 2004 No 35 ss FC 1(1), FC 2(2)
Financial arrangements adjustments
DB 11 Negative base price adjustment
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Deduction
(1) A person who has a negative base price adjustment under section EW 31(4) (Base price adjustment formula) is allowed a deduction for the expenditure to the extent to which it arises from assessable income, under section CC 3 (Financial arrangements), derived by the person under the financial arrangement in earlier income years.
Link with subpart DA
(2) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: assessable income, deduction, financial arrangement, general limitation, general permission, income year, supplement,
Compare: 2004 No 35 s DB 9
DB 12 Base price adjustment under old financial arrangements rules
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Deduction
(1) A person is allowed a deduction for an amount that is a deduction under section EZ 37(6) (Cash basis holder) or EZ 38(3) or (4) (Income and expenditure where financial arrangement redeemed or disposed of).
Link with subpart DA
(2) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: amount, deduction, general limitation, general permission, supplement,
Compare: 2004 No 35 s DB 9B
DB 13 Repayment of debt sold at discount to associate of debtor
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Deduction
(1) When section EW 49(5)(b) (Income and deduction when debt sold at discount to associate of debtor) applies, the debtor is allowed a deduction for the amount quantified in that subsection.
Link with subpart DA
(2) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: amount, associated person, deduction, general limitation, general permission, supplement,
Compare: 2004 No 35 s DB 10
DB 14 Security payment
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When subsection (2) applies
(1) Subsection (2) applies when—
(a) a person receives a security payment for a loss; and
(b) no other provision of this Act allows the person a deduction for the loss.
Deduction: loss
(2) The person is allowed a deduction for the loss quantified in section EW 51(2) (Deduction for security payment).
When subsection (4) applies
(3) Subsection (4) applies when—
(a) a person receives a security payment for a share loss as described in section DB 24; and
(b) the requirements of section DB 24 are met; and
(c) no other provision of this Act allows the person a deduction for the loss.
Deduction: share loss
(4) The person is allowed a deduction for the share loss quantified in section EW 51(4).
Link with subpart DA
(5) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: deduction, general limitation, general permission, loss, pay, security payment, supplement,
Compare: 2004 No 35 s DB 11
DB 15 Sureties
-
When this section applies
(1) This section applies when a surety incurs expenditure or loss under a security arrangement.
No deduction (with exceptions)
(2) Neither the surety nor a person with whom the surety was an associated person over the security arrangement’s term is allowed a deduction for the expenditure or loss to the extent to which the expenditure or loss is due to—
(a) the actions of the surety or a person with whom the surety was an associated person over the arrangement’s term; or
(b) the occurrence of an event, if the occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement’s term; or
(c) the non-occurrence of an event, if the non-occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement’s term.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: associated person, deduction, general permission, loss, security arrangement,
Compare: 2004 No 35 s DB 12
Share-lending arrangements
DB 16 Share-lending collateral under share-lending arrangements
-
No deduction
(1) A person is denied a deduction for the amount of expenditure incurred as share-lending collateral under a share-lending arrangement.
Link with subpart DA and other subject matter
Defined in this Act: amount, deduction, general permission, share-lending arrangement, share-lending collateral,
Compare: 2004 No 35 s DB 12B
DB 17 Replacement payments and imputation credits under share-lending arrangements
-
A person is allowed a deduction for—
(a) the amount of expenditure incurred as a replacement payment under a share-lending arrangement:
(b) the amount of imputation credit attached under sections OB 64 (Replacement payments) and RE 25 (When amount of tax treated as imputation credit) to the replacement payment.
Defined in this Act: amount, deduction, imputation credit, pay, replacement payment, share-lending arrangement,
Compare: 2004 No 35 s DB 12C
Premises or land costs
DB 18 Transaction costs: leases
-
Deduction
(1) A person is allowed a deduction for expenditure that they incur for the preparation and registration, or the renewal, of a lease of property.
Link with subpart DA
(2) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, lease,
Compare: 2004 No 35 s DB 13
DB 19 Expenses of failed or withdrawn application for resource consent
-
Deduction
(1) A person who applies for the grant of a resource consent under the Resource Management Act 1991 and is refused the grant or withdraws the application is allowed a deduction for expenditure—
(a) that the person incurs in relation to the application; and
(b) that would have been part of the cost of depreciable property, or otherwise a deduction, if the application had been granted; and
(c) for which the person is not allowed a deduction under another provision.
Timing of deduction
(2) The deduction is allocated to the income year in which the grant is refused or the application is withdrawn.
Link with subpart DA
(3) This section overrides the capital limitation. The general permission and other general limitations still apply.
Defined in this Act: accounting year, capital limitation, deduction, general limitation, general permission, income year,
Compare: 2004 No 35 s DB 13B
DB 20 Destruction of temporary building
-
Deduction
(1) A person is allowed a deduction for a loss that they incur through the destruction of a temporary building.
Link with subpart DA
(2) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, loss, supplement, temporary building,
Compare: 2004 No 35 s DB 14
DB 21 Amounts paid for non-compliance with covenant for repair
-
When this section applies
(1) This section applies when—
(a) a person who is a lessee of land uses it to derive income; and
(b) the lease contains a covenant requiring the lessee to maintain the land or to make repairs to improvements on the land; and
(c) the lessee does not comply with the covenant; and
(d) the lessee is, consequently, liable to pay an amount to the lessor; and
-
(e) either—
(i) the lessee, during the term of the lease or after it ends, pays the amount to the lessor; or
(ii) the lessor recovers the amount from the lessee during the term of the lease or after it ends.
Deduction
(2) The lessee is allowed a deduction for the amount paid to the extent to which it relates to maintenance or repairs and to the extent to which the lessee would have been allowed a deduction for the expenditure had the lessee incurred it during the term of the lease.
Timing of deduction
(3) The deduction is allocated to the income year in which the lessee pays the amount or the lessor recovers the amount.
Relationship with section EJ 11
(4) This section is overridden by section EJ 11 (Amount paid by lessee for non-compliance with covenant for repair).
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income, income year, lease, pay, repairs, supplement, term of the lease,
Compare: 2004 No 35 s DB 15
DB 22 Amounts paid for non-compliance and change in use
-
When this section applies
(1) This section applies when—
(a) a person who is a lessor receives an amount for non-compliance with a covenant for repair that is assessable income under section CC 2 (Non-compliance with covenant for repair); and
-
(b) in the income year in which the lessor receives the amount or in any of the following 4 income years,—
(i) the lessor does not use the land to which the amount relates to derive assessable income, but continues to own the land; and
(ii) the lessor incurs expenditure in maintaining the land or in making repairs to improvements on the land, including painting and general maintenance; and
(iii) the lessor would have been allowed a deduction if the land had been used for the purpose of deriving assessable income; and
(iv) in the absence of section DB 46, no other provision of this Act would allow the lessor a deduction for the expenditure.
Deduction
(2) The lessor is allowed a deduction for the expenditure.
Amount of deduction
(3) The amount of the deduction is the lesser of—
(a) the amount of the expenditure; and
-
(b) the part of the amount that is assessable income derived by the lessor in the income year in which the expenditure is incurred through the operation of—
(i) section CC 2; or
(ii) section EI 5 (Amount paid to lessor for non-compliance with covenant for repair); or
(iii) section EI 6 (Amount paid for non-compliance: when lessor ceases to own land).
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, assessable income, deduction, general limitation, general permission, income year, own, supplement,
Compare: 2004 No 35 s DB 16
Revenue account property
DB 23 Cost of revenue account property
-
Deduction
(1) A person is allowed a deduction for expenditure that they incur as the cost of revenue account property.
Portfolio investment entities
(2) Despite subsection (1), a person is denied a deduction for expenditure incurred as the cost of revenue account property if—
(a) the person is a portfolio investment entity; and
(b) section CX 55 (Proceeds from certain disposals by portfolio investment entities or New Zealand Superannuation Fund) applies to income derived by the person from the disposal of the revenue account property.
Link with subpart DA
(3) Subsection (1) overrides the capital limitation but the general permission must still be satisfied. Subsection (2) overrides the general permission. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, portfolio investment entity, revenue account property,
Compare: 2004 No 35 s DB 17
DB 24 Share losses
-
When this section applies
(1) This section applies when—
(a) a company (company A) acquires a share in another company (company B); and
(b) the share declines in value; and
(c) because of the decline in value, company A incurs a loss (the share loss), whether on a disposal of the share or a valuation of it under subpart ED (Valuation of excepted financial arrangements) or in any other way; and
-
(d) company B—
(i) itself uses the amount subscribed for the share; or
(ii) uses it to fund directly or indirectly another company (company C); and
(e) company B or company C has a tax loss, in the calculation of which the amount used is taken into account; and
(f) company A, or a company that is part of the same group of companies as company A at any time in the income year in which company B or company C has the tax loss, offsets an amount for the tax loss under section IC 1 (Company A making tax loss available to company B); and
(g) the offset is in a tax year before the tax year that corresponds to the income year in which company A incurs the share loss.
No deduction (with exception)
(2) Company A is denied a deduction for the share loss, except to the extent to which the share loss, as adjusted under subsection (3), is more than the amount offset under section IC 1, as adjusted under subsection (4).
Other denied deductions added
(3) When subsection (2) applies, the share loss is adjusted by adding every loss to which all the following apply:
(a) company A incurs it as a result of the share’s decline in value or the decline in value of another share if the use of the amount subscribed for the other share is taken into account in calculating the tax loss; and
(b) company A incurs it in an income year before the income year referred to in subsection (1)(g); and
(c) company A has been denied a deduction for it by the operation of subsection (2).
Other offsets added
(4) The amount offset under section IC 1 includes every amount that company A, or a company that is part of the same group of companies as company A at any time in the income year in which company A has the tax loss, has offset for the tax loss under that section in a tax year before the tax year that corresponds to the income year in which the share loss is incurred.
Link with subpart DA
(5) This section overrides the general permission.
Defined in this Act: amount, company, deduction, general permission, group of companies, income year, loss, share, tax loss, tax year,
Compare: 2004 No 35 s DB 18
DB 25 Cancellation of shares held as revenue account property
-
When this section applies
(1) This section applies for the purposes of section FA 4(3)(b) (Recharacterisation of shareholder’s base: company repurchasing share).
No deduction
(2) A shareholder is denied a deduction for the amount added to the cost of their remaining shares of the same class as that of the share cancelled, unless the share is trading stock of the shareholder.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: deduction, general permission, interest, profit-related debenture, substituting debenture,
Compare: 2004 No 35 s FC 4(f)(iv)
DB 26 Amount from profit-making undertaking or scheme and not already in income
-
When this section applies
(1) This section applies when a person derives income under section CB 3 (Profit-making undertaking or scheme) that is not their income under any other provision of this Act.
Deduction
(2) The person is allowed a deduction for the value of the property, as determined under subsection (3).
Determining amount of deduction
(3) For the purpose of determining the amount of the deduction, the person is treated as—
(a) having disposed of the property to an unrelated third party immediately before the start of the undertaking or scheme; and
(b) having reacquired the property immediately after the start of the undertaking or scheme at the market value of the property at the time.
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, supplement,
Compare: 2004 No 35 s DB 19
DB 27 Amount from major development or division and not already in income
-
When this section applies
(1) This section applies when a person derives income under section CB 13 (Disposal: amount from major development or division and not already in income) that is not their income under any other provision of this Act.
Deduction
(2) The person is allowed a deduction for the value of the land, as determined under subsection (3).
Determining amount of deduction
(3) For the purpose of determining the amount of the deduction, the person is treated as—
(a) having disposed of the land to an unrelated third party immediately before the start of the undertaking or scheme; and
(b) having reacquired it immediately after the start of the undertaking or scheme at the market value of the land at the time.
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, land, supplement,
Compare: 2004 No 35 s DB 20
DB 28 Amount from land affected by change and not already in income
-
When this section applies
(1) This section applies when a person derives income under section CB 14 (Disposal: amount from land affected by change and not already in income) that is not their income under any other provision of this Act.
Deduction
(2) The person is allowed—
(a) a deduction allowed under any other provision of this Act; and
(b) a deduction to the extent described in subsection (3).
Calculation of deduction
(3) The maximum amount of the deduction is the greater of $1,000 and an amount calculated using the formula in subsection (4). However, the amount must not be more than the profit obtained from the disposal of the land.
Formula
(4) The formula is—
percentage of profit × years.
Definition of items in formula
(5) In the formula,—
(a) percentage of profit is 10% of the profit on the disposal of the land:
(b) years is the number, up to and including 10, of consecutive years between the date on which the person acquired the land and the date on which they disposed of it, with the first year starting on the date on which the person acquired the land.
Meaning of profit
(6) In this section, profit means the excess of the amount derived over the cost of the land.
Link with subpart DA
(7) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, land, profit, supplement, year,
Compare: 2004 No 35 s DB 21
DB 29 Apportionment when land acquired with other property
-
If a person derives income under sections CB 6 to CB 14 (which relate to the disposal of land) from the disposal of land, and the land is acquired together with other property, the cost of acquisition must be apportioned between the land and the other property.
Defined in this Act: income, land, property,
Compare: 2004 No 35 s FB 4A
DB 30 Cost of non-specified mineral
-
When this section applies
(1) This section applies when—
(a) an amount of cost of a mineral is treated by a person under generally accepted accounting practice as a cost of the mineral for the person and reported accordingly for financial reporting purposes; and
(b) the mineral is not a specified mineral; and
(c) no other provision of this Act allows the person a deduction for the amount; and
(d) an amount derived by the person from disposing of the mineral would be income of the person under section CB 29 (Disposal of minerals).
Deduction
(2) The person is allowed a deduction for the amount.
Timing of deduction: trading stock
(3) If the amount is a cost of trading stock, the deduction is allocated to the income year in which the mineral first becomes trading stock of the person.
Timing of deduction: not trading stock
(4) If the amount is not a cost of trading stock, the deduction is allocated by section EA 2 (Other revenue account property).
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, dispose, general limitation, general permission, generally accepted accounting practice, income, income year, mineral, specified mineral, trading stock,
Compare: 2004 No 35 s DB 22
Bad debts
DB 31 Bad debts
-
No deduction (with exception)
(1) A person is denied a deduction in an income year for a bad debt, except to the extent to which—
(a) the debt is written off as bad in the income year; and
(b) in the case of the bad debts described in subsections (2) to (5), the requirements of the relevant subsection are met.
Deduction: financial arrangement debt: amount of income
(2) A person who derives assessable income from a financial arrangement to which the financial arrangements rules apply is allowed a deduction for an amount owing under the financial arrangement, but only to the extent to which—
(a) the amount is a bad debt and the requirement of subsection (1)(a) is met; and
(b) the amount is attributable to the income; and
(c) subsection (5) does not limit the deduction.
Deduction: financial arrangement debt: dealers in arrangements
(3) A person is allowed a deduction for an amount owing under a financial arrangement to which the financial arrangements rules apply, but only to the extent to which—
(a) the amount is a bad debt and the requirement of subsection (1)(a) is met; and
(b) the person carries on a business for the purpose of deriving assessable income that includes dealing in or holding financial arrangements that are the same as, or similar to, the financial arrangement; and
(c) the person is not associated with the person owing the amount written off; and
(d) subsection (5) does not limit the deduction.
Deduction: financial arrangement debt: dealers in property or services sold
(4) A person is allowed a deduction for an amount owing under a financial arrangement to which the financial arrangements rules apply, but only to the extent to which—
(a) the amount is a bad debt and the requirement of subsection (1)(a) is met; and
(b) the financial arrangement is an agreement for the sale and purchase of property or services; and
(c) the person carries on a business of dealing in the property or services that are the subject of the agreement; and
(d) the person carries on the business for the purpose of deriving assessable income; and
(e) subsection (5) does not limit the deduction.
Deduction: bad debt representing loss already offset
(5) A person is allowed a deduction for a bad debt only to the extent to which it is more than the total of the amounts offset under section IC 1 (Company A making tax loss available to company B) that are described in paragraphs (e) and (f) if—
(a) the person writing off the amount of debt is a company (company A); and
(b) the debt is owed to it by another company (company B); and
-
(c) company B—
(i) itself uses the amount giving rise to the debt; or
(ii) uses it to fund directly or indirectly another company (company C) that uses the amount; and
(d) company B or company C has a tax loss, in the calculation of which the amount used is taken into account; and
(e) company A, or a company that is part of the same group of companies as company A at any time in the income year in which company B or company C has the tax loss, offsets an amount for the tax loss under section IC 1; and
(f) the offset is in a tax year before the tax year that corresponds to the income year in which company A writes off the amount of debt, but not before the 1993–94 tax year.
Link with subpart DA
(6) The link between this section and subpart DA (General rules) is as follows:
(a) subsection (1) overrides the general permission; and
-
(b) for subsections (2) to (5),—
(i) they supplement the general permission, to the extent to which they allow a deduction that is denied under the general permission; and
(ii) they override the general permission, to the extent to which they deny a deduction that is allowed under the general permission; and
(iii) the other general limitations still apply.
Defined in this Act: agreement for the sale and purchase of property or services, amount, assessable income, associated person, business, company, deduction, financial arrangement, financial arrangements rules, general limitation, general permission, group of companies, income year, supplement, tax loss, tax year,
Compare: 2004 No 35 s DB 23
DB 32 Bad debts owed to estates
-
When this section applies
(1) This section applies when—
-
(a) a debt owing to a person at the date of their death is, in an income year,—
(i) assessable income of the person; or
(ii) assessable income of the trustee of their estate; and
(b) the trustee writes off some or all of the debt as bad because it is not recoverable.
Deduction
(2) The following persons, in the following order, are allowed a deduction for the amount of the debt written off:
(a) first, the trustee, to the extent of assessable income derived as trustee income in the income year; and
(b) second, any beneficiary who has a vested interest in the capital of the estate, to the extent of assessable income derived in the income year by or in trust for the beneficiary, and to the extent to which the amount is chargeable against the capital of the beneficiary; and
(c) third, the trustee or a beneficiary denied a deduction for the balance in the income year; each is allowed a deduction, as described in paragraph (a) or (b), in the next tax year, and so on.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, assessable income, deduction, general limitation, general permission, income year, supplement, trustee, trustee income,
Compare: 2004 No 35 s DB 24
-
Research and development
DB 33 Scientific research
-
Deduction: scientific research
(1) A person is allowed a deduction for expenditure they incur in connection with scientific research that they carry on for the purpose of deriving their assessable income.
Exclusion
(2) Subsection (1) does not apply to expenditure that the person incurs on an asset that—
(a) is not created from the scientific research; and
-
(b) is an asset for which they have an amount of depreciation loss for which—
(i) they are allowed a deduction; or
(ii) they would have been allowed a deduction but for the Commissioner’s considering that incomplete and unsatisfactory accounts were kept by or for them.
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, assessable income, capital limitation, Commissioner, deduction, depreciation loss, general limitation, general permission, supplement,
Compare: 2004 No 35 s DB 25
DB 34 Research or development
-
Deduction
(1) A person is allowed a deduction for expenditure they incur on research or development. This subsection applies only to a person described in any of subsections (2) to (5) and does not apply to the expenditure described in subsection (6).
Person recognising expenditure as expense
(2) Subsection (1) applies to a person who recognises the expenditure as an expense for financial reporting purposes under paragraph 5.1 or 5.2 of the reporting standard.
Person not recognising expenditure as asset
(3) Subsection (1) also applies to a person who does not recognise the expenditure as an asset for financial reporting purposes because of paragraph 5.4 of the reporting standard.
Person recognising expenditure otherwise
(4) Subsection (1) also applies to a person who—
(a) recognises the expenditure as an expense for financial reporting purposes because of paragraph 2.3 of the reporting standard; and
-
(b) would be required to recognise the expenditure as an expense for financial reporting purposes under paragraph 5.1 or 5.2, or because of paragraph 5.4, of the standard if—
(i) any 1 of those paragraphs were applied to the expenditure; and
(ii) the expenditure were material.
Person with minor expenditure
(5) Subsection (1) also applies to a person who—
(a) incurs expenditure of $10,000 or less, in total, on research and development in an income year; and
(b) has not treated the expenditure as material, as described in paragraph 2.3 of the reporting standard; and
(c) has recognised the expenditure as an expense for financial reporting purposes.
Exclusion
(6) Subsection (1) does not apply to expenditure that the person incurs on property to which all the following apply:
(a) the property is used in carrying out research or development; and
(b) it is not created from the research or development; and
-
(c) it is 1 of the following kinds:
(i) property for which the person is allowed a deduction for an amount of depreciation loss; or
(ii) property the cost of which is allowed as a deduction by way of amortisation under a provision of this Act outside subpart EE (Depreciation); or
(iii) land; or
(iv) intangible property, other than depreciable intangible property; or
(v) property that its owner chooses, under section EE 8 (Election that property not be depreciable) to treat as not depreciable.
Choice for allocation of deduction
(7) A person who is allowed a deduction under this section for expenditure that is not interest may choose to allocate all or part of the deduction—
(a) to an income year after the income year in which the person incurs the expenditure; and
(b) in the way required by section EJ 23 (Allocation of deductions for research, development, and resulting market development).
Section need not be applied
(8) A person may return income and expenditure in their return of income on the basis that this section does not apply to expenditure incurred on research or development in the income year to which the return relates.
Relationship with section EA 2
(9) If expenditure to which this section applies is incurred in devising an invention that is patented, the expenditure is not treated as part of the cost of revenue account property for the purposes of section EA 2 (Other revenue account property).
Link with subpart DA
(10) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, depreciable intangible property, depreciation loss, development, general limitation, general permission, income, income year, reporting standard, research, return of income, revenue account property,
Compare: 2004 No 35 s DB 26
DB 35 Some definitions
-
Definitions
(1) In this section, and in sections DB 34, EE 1, EJ 22, and EJ 23 (which relate to expenditure on research and development),—
development is defined in paragraphs 4.1 and 4.2 of the reporting standard as interpreted by paragraphs 4.3 to 4.7
reporting standard means Financial Reporting Standard No 13 1995 (Accounting for Research and Development Activities) or an equivalent standard issued in its place, that applies in the income year in which the expenditure is incurred
research is defined in paragraphs 4.1 and 4.2 of the reporting standard, as interpreted by paragraphs 4.3 to 4.7.
Meaning of research or development: modification by Order in Council
(2) The Governor-General may make an Order in Council specifying—
(a) a kind of expenditure that is not expenditure on research or development for the purposes of section DB 34:
(b) an activity that is neither research nor development for the purposes of section DB 34:
(c) the date from which the expenditure or the activity is excluded from being research or development.
Defined in this Act: development, income year, reporting standard, research,
Compare: 2004 No 35 s DB 27
DB 36 Patent expenses
-
Deduction
(1) A person is allowed a deduction for expenditure that they incur in connection with the grant, maintenance, or extension of a patent if they—
(a) acquired the patent before 23 September 1997; and
(b) use the patent in deriving income in the income year in which they incur the expenditure.
Link with subpart DA
(2) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income, income year,
Compare: 2004 No 35 s DB 28
DB 37 Expenses of failed or withdrawn patent application
-
Deduction
(1) A person who applies for the grant of a patent and is refused the grant or withdraws the application is allowed a deduction for expenditure—
(a) that the person incurs in relation to the application; and
(b) that would have been part of the cost of fixed life intangible property if the application had been granted; and
(c) for which the person is not allowed a deduction under another provision.
Timing of deduction
(2) The deduction is allocated to the income year in which the grant is refused or the application is withdrawn.
Link with subpart DA
(3) This section overrides the capital limitation. The general permission and other general limitations still apply.
Defined in this Act: capital limitation, deduction, fixed life intangible property, general limitation, general permission, income year,
Compare: 2004 No 35 s DB 28B
DB 38 Patent rights: devising patented inventions
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When this section applies
(1) This section applies when a person incurs expenditure in devising an invention for which a patent has been granted. The section applies whether the person devised the invention alone or in conjunction with another person.
Deduction: expenditure before 1 April 1993
(2) When the person uses the patent in deriving income in an income year, they are allowed a deduction for expenditure incurred before 1 April 1993, but not if a deduction has been allowed for the expenditure under any other provision of this Act or an earlier Act.
Deduction: devising invention
(3) If the person sells all the patent rights relating to the invention, they are allowed a deduction for the expenditure that they have incurred, whenever it is incurred, in connection with devising the invention to the extent to which a deduction has not already been allowed under subsection (2).
Deduction: devising invention: proportion of expenditure
(4) If the person sells some of the patent rights relating to the invention, they are allowed a deduction for part of the expenditure described in subsection (3). The part is calculated by dividing the amount derived from the sale by the market value of the whole of the patent rights on the date of the sale.
Link with subpart DA
(5) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, general limitation, general permission, income, income year, patent right,
Compare: 2004 No 35 s DB 29
DB 39 Patent rights acquired before 1 April 1993
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When this section applies
(1) This section applies when a person sells patent rights that they acquired before 1 April 1993.
Deduction
(2) The person is allowed a deduction on the sale of the patent rights.
Amount of deduction
(3) The amount is calculated using the formula—
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, general limitation, general permission, patent right,
Compare: 2004 No 35 s DB 30
DB 40 Patent applications or patent rights acquired on or after 1 April 1993
-
When this section applies
(1) This section applies when a person sells a patent application with a complete specification or patent rights that they acquired on or after 1 April 1993.
Deduction
(2) The person is allowed a deduction on the sale of the patent application with a complete specification or patent rights.
Amount of deduction
(3) The amount is calculated using the formula—
total cost − total amounts of depreciation loss.
Definition of items in formula
(4) In the formula,—
(a) total cost is the total cost to the person of the patent application with a complete specification or of the patent rights, excluding any expenditure for which the person has been allowed a deduction under section DZ 15 (Patent applications before 1 April 2005):
(b) total amounts of depreciation loss is the total of the amounts of depreciation loss, for which the person is allowed a deduction, for the patent application with a complete specification or for the patent rights and the patent application relating to the patent rights.
Link with subpart DA
(5) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, depreciation loss, general limitation, general permission, patent right,
Compare: 2004 No 35 s DB 31
Marketing
DB 41 Charitable or other public benefit gifts by company
-
Who this section applies to
(1) This section applies to—
(a) a company that is not a close company:
(b) a close company that has its shares quoted on the official list of a recognised exchange.
Deduction
(2) The company is allowed a deduction for a charitable or other public benefit gift that it makes to a society, institution, association, organisation, trust, or fund of any of the kinds set out in schedule 32 (Recipients of charitable or other public benefit gifts).
Amount of deduction
(3) The deduction for the total of all gifts made in an income year is limited to 5% of the amount that would be the company’s net income in the corresponding tax year in the absence of this section.
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, charitable or other public benefit gift, close company, company, deduction, general limitation, general permission, income year, net income, recognised exchange, share, supplement, tax year,
Compare: 2004 No 35 s DB 32
Theft and bribery
DB 42 Property misappropriated by employees or service providers
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When this section applies
(1) This section applies when—
(a) a person carries on a business; and
(b) an employee of the business, or a person who provides services to the business, misappropriates property; and
(c) no other provision of this Act allows the person who carries on the business a deduction for the loss resulting from the misappropriation.
Exclusions
(2) This section does not apply when—
(a) the person who misappropriates the property is a relative of the person who carries on the business; or
-
(b) the business is carried on by a company, and—
(i) the company and the person who misappropriates the property are associated persons; or
(ii) the company and a relative of the person who misappropriates the property are associated persons; or
(c) the person who carries on the business is a trustee of a trust, and the person who misappropriates the property either created the trust, settled property on the trust, or is a beneficiary of the trust.
Deduction
(3) The person is allowed a deduction for the loss that they incur in the course of the business as a result of the misappropriation of the property.
Timing of deduction
(4) The deduction is allocated to the income year in which the loss is ascertained, or in 1 or more earlier years if, in the circumstances, the Commissioner considers it would be fair.
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: associated person, business, capital limitation, Commissioner, company, deduction, employee, general limitation, general permission, income year, relative, supplement, trustee,
Compare: 2004 No 35 s DB 33
DB 43 Making good loss from misappropriation by partners
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When this section applies
(1) This section applies when a person carrying on a business in partnership pays an amount to make good a loss that arises from a partner, other than the person or the person’s spouse, civil union partner, or de facto partner, misappropriating property that—
(a) belongs to another person who is neither a partner in the partnership nor the spouse, civil union partner, or de facto partner of a partner; and
(b) is received in the course of the business either by the partnership or 1 or more of its partners.
Deduction
(2) The person is allowed a deduction for the amount if the person is under a legal liability to make good the loss.
Timing of deduction
(3) The deduction is allocated to the income year in which the amount is paid.
Link with subpart DA
(4) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, general limitation, general permission, income year, pay, supplement,
Compare: 2004 No 35 s DB 34
DB 44 Restitution of stolen property
-
Deduction
(1) A person who derives income under section CB 32 (Property obtained by theft) is allowed a deduction for the amount of restitution that they make to a person who is beneficially entitled to property to which section CB 32 applies.
Timing of deduction
(2) The deduction is allocated to the income year in which the person makes restitution.
Meaning of restitution
(3) In this section, restitution includes restitution made to a person claiming through the person beneficially entitled to the property.
Link with subpart DA
(4) This section supplements the general permission and overrides the capital limitation and the private limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, general limitation, general permission, income, income year, private limitation, property, restitution, supplement,
Compare: 2004 No 35 s DB 35
DB 45 Bribes paid to public officials
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When this section applies
(1) This section applies when—
(a) a person (person A) corruptly gives a bribe to another person; and
-
(b) person A gives the bribe intending to influence a public official to act, or to fail to act, in their official capacity in order to—
(i) obtain or retain business for person A; or
(ii) obtain an improper advantage for person A in the conduct of business; and
(c) the official either has or does not have the authority to act or to fail to act.
No deduction
(2) Person A is denied a deduction for the amount of the bribe.
Exclusions
(3) This section does not apply if—
(a) person A gives the bribe outside New Zealand and, at the time, the bribe is not an offence under the laws of the foreign country where the principal office of the person, organisation, or other body that employs the foreign public official or for whom the official provides services is situated:
(b) the bribe is given wholly or mainly to ensure or expedite the performance by a foreign public official of a routine government action when the value of the benefit is small.
Some definitions
(4) In this section,—
benefit, foreign country, and foreign public official are defined in section 105C of the Crimes Act 1961
bribe is defined in section 99 of the Crimes Act 1961
public official means—
(a) a member of Parliament or a Minister of the Crown; and
(b) a judicial officer, a law enforcement officer, or an official, as those terms are defined in section 99 of the Crimes Act 1961; and
(c) a foreign public official
routine government action is defined in section 105C of the Crimes Act 1961.
Link with subpart DA
(5) This section overrides the general permission.
Defined in this Act: amount, benefit, bribe, business, deduction, foreign country, foreign public official, general permission, New Zealand, pay, public official, routine government action,
Compare: 2004 No 35 s DB 36
Pollution control
DB 46 Avoiding, remedying, or mitigating effects of discharge of contaminant
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When this section applies
(1) This section applies when a person—
(a) carries on a business in New Zealand; and
-
(b) the person incurs, in the business or in ending the operations of the business, expenditure that is—
(i) of a kind listed in schedule 19, part B (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant) and not in schedule 19, part C; and
(ii) not incurred in relation to revenue account property other than land that is subject to section CB 8 (Disposal: land used for landfill, if notice of election); and
(c) no other provision allows a deduction for the expenditure.
Amount and timing of deduction
(2) The person is allowed for an income year a deduction for the expenditure of,—
-
(a) if paragraphs (b) and (c) do not apply, an amount that is calculated using the formula—
rate × value:
(b) if the operations of the business for which the expenditure was incurred come to an end in the income year, the diminished value or adjusted tax value of the expenditure for the income year:
(c) if an improvement on which the expenditure was incurred is destroyed, or is rendered useless for the purposes for which the expenditure was incurred, and paragraph (b) does not apply, the diminished value or adjusted tax value of the expenditure for the income year.
Definition of items in formula
(3) The items in the formula in subsection (2)(a) are defined in subsections (4) and (6).
Rate
(4) Rate is—
(a) 100%, if the expenditure is of a kind listed in schedule 19, part A, item 1, or part B and neither paragraph (b) nor (c) applies:
-
(b) the appropriate rate under subsection (5) if—
(i) the expenditure is of a kind listed in schedule 19, part A, items 2 to 5; and
(ii) paragraph (c) does not apply:
(c) the rate for the kind of expenditure, the income year, the valuation method adopted under subsection (6), and the person, determined by the Commissioner under section 91AAN of the Tax Administration Act 1994, if such a rate is determined.
Banded straight-line rate or corresponding diminishing value rate
(5) The rate for expenditure if the requirements of subsection (4)(b) are met is—
(a) the straight-line rate set out in schedule 12, column 2 (Old banded rates of depreciation) that is nearest to the rate calculated for the expenditure using the formula in subsection (7), if the person chooses to use the straight-line method:
(b) the diminishing value rate set out in schedule 12, column 1 that corresponds to the straight-line rate under paragraph (a), if the person chooses to use the diminishing value method.
Value
(6) Value is—
(a) the adjusted tax value of the expenditure, if the person chooses to use the straight-line method:
(b) the diminished value of the expenditure for the income year, if the person chooses to use the diminishing value method.
Formula for rate for expenditure with assumed life
(7) The formula for the straight-line rate for a kind of expenditure to which subsection (4)(b) applies is—
Definition of item in formula
(8) In the formula in subsection (7), assumed life for expenditure and an income year is,—
(a) for expenditure associated with a business activity that does not require a resource consent, 35:
(b) for expenditure associated with a business activity that requires a resource consent, the lesser of 35 and the number of the years in the period of the resource consent that include or follow the time at which the expenditure is incurred.
Link with subpart DA
(9) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, diminished value, general limitation, general permission, income year, New Zealand,
Compare: 2004 No 35 s DB 37
Repayments
DB 47 Payments for remitted amounts
-
When this section applies
(1) This section applies when—
(a) a person is allowed a deduction in an income year of an amount that the person is liable to pay; and
(b) the person’s liability for the amount is later remitted or cancelled, wholly or partly; and
(c) the remission or cancellation is not a dividend; and
(d) the person is not required to calculate a base price adjustment by section EW 29 (When calculation of base price adjustment required); and
(e) the amount to which the remission or cancellation applies is assessable income of the person under section CG 2 (Remitted amounts); and
(f) the person makes a payment for the amount to which the remission or cancellation applies.
Amount, and timing, of deduction
(2) The person is allowed a deduction for the amount of the payment in the income year in which it is made.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, assessable income, deduction, dividend, general limitation, general permission, income year, pay, supplement,
Compare: 2004 No 35 s DB 38
DB 48 Restrictive covenant breached
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When this section applies
(1) This section applies when an employee (person A) makes a payment to another person (person B) in the following circumstances:
(a) person A derives assessable income under section CE 9 (Restrictive covenants); and
(b) person A breaches a term of the undertaking they gave to person B; and
(c) person A is, consequently, required to make the payment to person B.
Deduction
(2) Person A is allowed a deduction for the payment.
Amount of deduction
(3) The amount of the deduction is the lesser of the following:
(a) the assessable income that person A derives under section CE 9; and
(b) the payment that person A makes to person B, excluding interest, punitive damages, exemplary damages, and person B’s legal costs and other expenses.
Timing of deduction
(4) The deduction is allocated to the income year in which person A makes the payment to person B.
Link with subpart DA
(5) This section supplements the general permission and overrides the employment limitation. The other general limitations still apply.
Defined in this Act: amount, assessable income, deduction, employee, employment limitation, general limitation, general permission, income year, interest, pay, supplement,
Compare: 2004 No 35 s DB 39
Matching rules: revenue account property, prepayments, and deferred payments
DB 49 Adjustment for opening values of trading stock, livestock, and excepted financial arrangements
-
When this section applies
(1) This section applies when a person has some or all of the following at the start of an income year:
(a) trading stock valued under subpart EB (Valuation of trading stock (including dealer’s livestock)):
(b) livestock valued under subpart EC (Valuation of livestock):
(c) excepted financial arrangements that are revenue account property valued under subpart ED (Valuation of excepted financial arrangements):
(d) a share supplier’s share-lending right, if the original shares that relate to the right are excepted financial arrangements described in paragraph (c).
Deduction: opening value of trading stock
(2) The person is allowed a deduction in the income year for the value that the trading stock had at the end of the previous income year, as calculated under section EB 3 (Valuation of trading stock).
Deduction: opening value of livestock
(3) The person is allowed a deduction in the income year for the value that the livestock had at the end of the previous income year, as calculated under section EC 2 (Valuation of livestock).
Deduction: opening value of excepted financial arrangements
(4) The person is allowed a deduction in the income year for the value that the excepted financial arrangements or share-lending right had at the end of the previous income year, as calculated under section ED 1 (Valuation of excepted financial arrangements).
Link with subpart DA
(5) This section supplements the general permission. The general limitations still apply.
Defined in this Act: deduction, excepted financial arrangement, general limitation, general permission, income year, original share, revenue account property, share-lending right, share supplier, supplement, trading stock,
Compare: 2004 No 35 s DB 40
DB 50 Adjustment for prepayments
-
When this section applies
(1) This section applies when a person has, under section EA 3 (Prepayments), an unexpired amount of expenditure at the end of an income year.
Deduction
(2) The person is allowed a deduction for the unexpired amount for the following income year.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply, but not to the extent to which any relevant general limitation was overridden by a provision that initially allowed a deduction for the expenditure, whether in this Act or an earlier Act.
Defined in this Act: amount, deduction, general limitation, general permission, income year, supplement,
Compare: 2004 No 35 s DB 41
DB 51 Adjustment for deferred payment of employment income
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When this section applies
(1) This section applies when a person has, under section EA 4 (Deferred payment of employment income), an unpaid amount of expenditure on employment income in an income year for which the person is to be allowed a deduction in the following income year.
Deduction
(2) The person is allowed a deduction for the unpaid amount for the following income year.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply, but not to the extent to which any relevant general limitation was overridden by a provision that initially allowed a deduction for the expenditure, whether in this Act or an earlier Act.
Defined in this Act: amount, deduction, employment income, general limitation, general permission, income year, pay, supplement,
Compare: 2004 No 35 s DB 42
Change to accounting practice
DB 52 Adjustment for change to accounting practice
-
When this section applies
(1) This section applies when a person has, under section EG 2(2) or (3) (Adjustment for changes to accounting practice), an amount owed by them or an amount owing to them as quantified in those subsections.
Amount, and timing, of deduction
(2) The person is allowed a deduction of the amount as quantified and allocated under section EG 2.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, supplement,
Compare: 2004 No 35 s DB 43
Investment income
DB 53 Portfolio investment entities: zero-rated portfolio investors and allocated losses
-
When this section applies
(1) This section applies when—
(a) an investor in a portfolio investment class of a portfolio tax rate entity that pays tax under section HL 22 (Payments of tax by portfolio tax rate entity making no election) exits from the entity during a portfolio calculation period; and
(b) the investor is a zero-rated portfolio investor for the period; and
(c) the period includes a portfolio allocation period for which the investor is allocated an amount of portfolio investor allocated loss under subpart HL (Portfolio investment entities).
Deduction
(2) The investor is allowed a deduction for the income year for the amount of portfolio investor allocated loss if—
(a) the portfolio tax rate entity pays tax under section HL 22 or HL 23 (Payments of tax by portfolio tax rate entity choosing to pay provisional tax) and the investor’s income year includes the end of the portfolio calculation period:
(b) the portfolio tax rate entity pays tax under section HL 24 (Payments of tax by portfolio tax rate entity choosing to make payments when investor leaves) and the investor’s income year includes the end of the tax year in which the portfolio calculation period occurs.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: deduction, general limitation, general permission, income year, investor, pay, portfolio allocation period, portfolio calculation period, portfolio investor allocated loss, portfolio investor class, portfolio tax rate entity, tax, tax year, zero-rated portfolio investor,
Compare: 2004 No 35 s DB 17
DB 54 Portfolio investment entities: treatment of certain fees charged
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When this section applies
(1) This section applies when—
(a) an investor in a portfolio investment class of a portfolio tax rate entity incurs fees in relation to the investor’s portfolio investor interest; and
(b) the amount of the fees is included in the calculation of the entity’s portfolio entity tax liability under section HL 21 (Portfolio entity tax liability and tax credits of portfolio tax rate entity for period) for the investor, the portfolio investment class, and a portfolio calculation period.
No deduction
(2) The investor is denied a deduction for the amount of the fees.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: amount, deduction, general permission, investor, pay, portfolio calculation period, portfolio investor class, portfolio investor interest, portfolio tax rate entity,
Compare: 2004 No 35 s DB 43C
Exempt income
DB 55 Expenditure incurred in deriving exempt dividend
-
Deduction
(1) A company that derives a dividend that is exempt income of the company under section CW 9 (Dividend derived by company from overseas) is allowed a deduction of—
(a) the amount of the expenditure incurred by the company in deriving the dividend, if the company is not a conduit tax relief (CTR) company:
-
(b) the amount calculated using the following formula, if the company is a CTR company:
expenditure × (1 − non-resident shareholding).
Definition of items in formula
(2) In the formula,—
(a) expenditure is the amount of the expenditure incurred by the company in deriving the dividend:
(b) non-resident shareholding is the fraction of the company’s shareholders that are non-residents, calculated under section RG 7(3) and (4) (Reduction of payments for conduit tax relief).
Link with subpart DA
(3) This section overrides the exempt income limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: company, CTR company, deduction, dividend, exempt income, exempt income limitation, general limitation, general permission, non-resident, shareholder,
Compare: 2004 No 35 s DB 44
Use of motor vehicle under certain arrangements
DB 56 Expenditure incurred in operating motor vehicle under agreement or arrangement affected by section CX 7
-
Deduction
(1) A party to an agreement or arrangement referred to in section CX 7 (Employer or associated person treated as having right to use vehicle under arrangement) is allowed a deduction for expenditure or an amount of depreciation loss incurred in operating a motor vehicle during a period for which an employer or associated person is treated under that section as having a right to use the vehicle.
Link with subpart DA
(2) This section overrides the private limitation and exempt income limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, arrangement, deduction, depreciation loss, exempt income limitation, general limitation, general permission, lease, motor vehicle,
Compare: 2004 No 35 s DB 45
Payments to spouses, civil union partners, or de facto partners
DB 57 Payments to spouses, civil union partners, or de facto partners other than for services
-
No deduction without approval
(1) A person is denied a deduction for a payment to their spouse, civil union partner, or de facto partner for something other than services, without the Commissioner’s approval.
Commissioner’s approval
(2) The Commissioner may approve the deduction only if—
(a) the Commissioner considers that the payment is genuine; and
(b) the payment is incurred by the person exclusively in deriving their assessable income; and
(c) the approval is granted before the deduction is claimed.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: assessable income, Commissioner, deduction, general permission, pay,
Compare: 2004 No 35 s GD 4
Avoidance and non-market transactions
DB 58 Adjustment for avoidance arrangements
-
Deduction denied
(1) An amount is not a deduction of a person if the deduction is denied under—
(a) section GA 1 (Commissioner’s power to adjust):
(b) section GB 17 (Excessive amounts for film rights or production expenditure):
(c) section GB 18 (Arrangements to acquire film rights or incur production expenditure):
(d) section GB 23 (Excessive remuneration to relatives):
(e) section GB 25 (Close company remuneration to shareholders, directors, or relatives).
Deduction
(2) An amount treated as a deduction of a person under any of the following sections is a deduction of the person:
(a) section GA 1:
(b) section GB 23:
(c) section GB 29 (Attribution rule: calculation):
(d) section GB 46 (Deferral of surplus deductions from arrangements).
Link with subpart DA
(3) Subsection (1) overrides, and subsection (2) supplements, the general permission. The general limitations still apply.
Defined in this Act: amount, arrangement, close company, Commissioner, deduction, depreciation loss, director, film production expenditure, film rights, general limitation, general permission, relative, shareholder,
Compare: 2004 No 35 ss GB 1(1)–(2C), GC 11A, GC 31, GD 3(1), (2), GD 5, GD 12, GD 12A
DB 59 Market value substituted
-
Transfer pricing arrangements
(1) A person may be denied a deduction under section GC 7 (Excess amount payable by person).
Acquisition for below market value
(2) A person may be treated as providing an amount—
(a) for acquisition of trading stock, under section GC 1 (Disposals of trading stock at below market value):
(b) for lease of a property, under section GC 5 (Leases for inadequate rent).
Link with subpart DA
(3) Subsection (1) overrides, and subsection (2) supplements, the general permission. The general limitations still apply.
Defined in this Act: deduction, general limitations, general permission, lease, trading stock,
Compare: 2004 No 35 ss GD 7, GD 10
Subpart DC—Employee or contractor expenditure
DC 1 Lump sum payments on retirement
-
Deduction
(1) A person who carries on a business is allowed a deduction for a lump sum paid as a bonus, gratuity, or retiring allowance to an employee on retirement.
Inclusions
(2) For the purposes of subsection (1), a lump sum paid on retirement includes a lump sum paid to—
(a) an employee when they end their employment or service through redundancy, loss of office, or similar circumstances:
(b) a former employee when they are unable to be reemployed in seasonal work in circumstances that would be considered the loss of employment or service through redundancy if they resulted in ending the seasonal work.
Exclusion
(3) This section does not apply to the extent to which the person has accepted a liability, as described in section DC 10(1)(c), to pay an amount of employment income.
Timing of deduction
(4) The deduction is allocated to the income year in which the lump sum is paid.
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, employee, employment income, general limitation, general permission, income year, pay, supplement,
Compare: 2004 No 35 s DC 1
DC 2 Pension payments to former employees
-
When subsection (2) applies
(1) Subsection (2) applies when—
(a) a person, other than a close company, carries on a business; and
(b) a former employee has retired from their employment in the business or their employment has ended through redundancy or similar circumstances; and
(c) they are paid a pension in consideration of their past services in the business; and
(d) they or their spouse, civil union partner, or de facto partner has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner, or de facto partner, until the spouse, civil union partner, or de facto partner enters a new marriage, civil union, or de facto relationship.
Deduction: not close company
(2) The person is allowed a deduction for a reasonable amount paid as the pension to the former employee or their surviving spouse, civil union partner, or de facto partner.
When subsection (4) applies
(3) Subsection (4) applies when—
(a) a close company carries on a business; and
(b) a former employee of the company is or has been a shareholder in it or has a relative who is or has been a shareholder in it; and
(c) the former employee’s employment in the company was genuine; and
(d) they have retired from the employment or their employment has ended through redundancy or similar circumstances; and
(e) they are paid a pension in consideration of their past services in the business; and
(f) they or their spouse, civil union partner, or de facto partner has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner, or de facto partner, until the spouse, civil union partner, or de facto partner enters a new marriage, civil union, or de facto relationship.
Deduction: close company
(4) The close company is allowed a deduction for the amount paid as the pension to the former employee or their surviving spouse, civil union partner, or de facto partner.
Amount of deduction under subsection (4)
(5) The amount of the deduction allowed under subsection (4) is the amount that the company would have paid if the former employee or their relative were not, or had not been, a shareholder in the company.
Timing of deductions
(6) A deduction under this section is allocated to the income year in which the amount is paid.
Relationship with section FB 11
(7) Section FB 11 (Pension payments to former employees) expands on this section.
Link with subpart DA
(8) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, close company, deduction, employee, general limitation, general permission, income year, pay, relative, shareholder, supplement,
Compare: 2004 No 35 s DC 2
DC 3 Pension payments to former partners
-
When this section applies
(1) This section applies when—
(a) a person is a partner in a partnership; or
(b) a person who was a partner in a partnership is in business on their own account.
Exclusion
(2) This section does not apply to a partnership or a business that is engaged wholly or mainly in investing money or in holding, or dealing in, shares, securities, investments, or estates or interests in land.
Deduction
(3) The person is allowed a deduction for their share of an amount, to the extent to which the amount is reasonable, paid as a pension to a former partner, or to the spouse, civil union partner, or de facto partner of a deceased former partner, if—
(a) the partnership in which the former partner was a partner (the old partnership) carried on the same business as that now carried on either by the partnership that is paying the pension or by the person in business who is paying the pension; and
(b) the former partner retired from the old partnership or their employment ended through retirement; and
(c) the former partner or their spouse, civil union partner, or de facto partner has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner, or de facto partner, until the spouse, civil union partner, or de facto partner enters a new marriage, civil union, or de facto relationship; and
(d) the pension is paid for the former partner’s services in the old partnership.
Link with subpart DA
(4) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, estate, general limitation, general permission, interest, land, pay, share, supplement,
Compare: 2004 No 35 s DC 3
DC 4 Payments to working partners
-
Deduction
(1) A person who is a partner in a partnership is allowed a deduction for their share of a payment made under a contract of service to a partner who personally and actively performs duties that—
(a) are required to be performed in carrying on the business of the partnership; and
(b) are performed by the partner during the currency of the contract of service.
Exclusion
(2) This section does not apply to a partnership that is engaged wholly or mainly in investing money or in holding, or dealing in, shares, securities, investments, or estates or interests in land.
Amount of deduction
(3) The amount of the deduction is limited to the amount of the payment authorised by the contract of service and any bonus, whether or not the payment of a bonus is authorised by the contract.
Relationship with section GB 23
(4) This section is overridden by section GB 23 (Excessive remuneration to relatives).
Meaning of contract of service
(5) In this section, contract of service, for a partner and a partnership, means an agreement that—
(a) specifies the terms and conditions of the services to be performed by the partner; and
(b) specifies the amount payable to the partner for the performance of the services; and
(c) is entered into by all the partners in the partnership; and
(d) is in writing.
Link with subpart DA
(6) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, business, contract of service, deduction, estate, general limitation, general permission, interest, land, pay, share, supplement,
Compare: 2004 No 35 s DC 4
DC 5 Payments to spouses, civil union partners, or de facto partners: services
-
No deduction without approval
(1) A person is denied a deduction for a payment to their spouse, civil union partner, or de facto partner for services without the Commissioner’s approval.
When Commissioner can give consent
(2) The Commissioner may approve the deduction only if—
(a) the Commissioner considers that the payment is for services rendered; and
(b) the services are not domestic services or otherwise services connected with the home; and
(c) the payment is incurred by the person exclusively in deriving their assessable income; and
(d) the approval is granted before the deduction is claimed.
Relationship with section GB 23
(3) This section is overridden by section GB 23 (Excessive remuneration to relatives).
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: assessable income, Commissioner, deduction, general permission, pay,
Compare: 2004 No 35 s GD 4
DC 6 Contributions to employees’ benefit funds
-
Deduction
(1) An employer is allowed a deduction for an amount that they pay to, or set aside as, a fund to provide individual personal benefits to their employees if—
(a) the fund is not a superannuation scheme; and
(b) the employees’ rights to receive benefits from the fund are fully secured.
Link with subpart DA
(2) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, employee, employer, general limitation, general permission, pay, superannuation scheme, supplement,
Compare: 2004 No 35 s DC 5
DC 7 Contributions to employees’ superannuation schemes
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Deduction
(1) An employer is allowed a deduction for a contribution to an employees’ superannuation scheme.
Timing of deduction
(2) The deduction is allocated to the income year in which the employer makes the contribution.
Relationship with section EJ 21
(3) Subsection (2) is overridden by section EJ 21 (Contributions to employees’ superannuation schemes).
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, employee, employer, general limitation, general permission, income year, superannuation scheme,
Compare: 2004 No 35 s DC 6
DC 8 Attribution of personal services
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When this section applies
(1) This section applies when, under sections GB 27 to GB 29 (which relate to the attribution rule for income from personal services), an amount of income of a person (the associated entity) is attributed to another person (the working person).
Deduction
(2) The associated entity is allowed a deduction for the amount attributed.
Timing of deduction
(3) The deduction is allocated to the income year in which the amount is attributed to the working person.
Link with subpart DA
(4) This section supplements the general permission and overrides all the general limitations.
Defined in this Act: amount, deduction, general limitation, general permission, income year, supplement,
Compare: 2004 No 35 s DC 7
DC 9 Restrictive covenants or exit inducements
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Deduction
(1) A person is allowed a deduction for expenditure that they incur that is income of another person under section CE 9 (Restrictive covenants) or CE 10 (Exit inducements).
Exclusion
(2) This section does not apply if—
(a) the other person performs services for the person; and
(b) expenditure that the person would have incurred for the services, if the other person had not derived an amount that is income under section CE 9 or CE 10, would have been of a capital nature.
Link with subpart DA
(3) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, general limitation, general permission, income,
Compare: 2004 No 35 s DC 8
DC 10 Sale of business: transferred employment income obligations
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When this section applies
(1) This section applies when—
(a) a person (the seller) sells a business, or a part of a business, to another person (the buyer); and
(b) an employee of the seller working in the business, or the part of the business, becomes an employee of the buyer under the sale arrangements; and
(c) the seller and the buyer agree in writing, under the sale arrangements, that the buyer assumes the obligation to pay an amount of employment income to the employee.
Deduction: parties not associated
(2) If the seller and the buyer are not associated persons at the time of the sale,—
(a) the seller is allowed a deduction, in the income year of the sale, for the provision made by the seller for any part of the amount that remains contingent on the employee continuing in employment or any similar factor; and
(b) the seller is treated under section EA 4(4) (Deferred payment of employment income) as having paid the amount of the provision at the time of sale.
Deduction: parties associated
(3) If the seller and the buyer are associated persons at the time of the sale,—
(a) the buyer is allowed a deduction for the provision made by the seller for the amount of employment income if the seller would have been allowed a deduction for the amount if the business, or the part of the business, had not been sold; and
(b) subsection (2) does not apply, and section EA 4(5) will mean that the seller cannot get a deduction for the amount.
Deduction: excess
(4) The buyer is allowed a deduction for any part of the amount of employment income that the buyer pays that is more than the provision made by the seller for the amount.
Link with subpart DA
(5) The link between this section and subpart DA (General rules) is as follows:
(a) subsection (2)(a) supplements the general permission; the general limitations still apply:
(b) subsections (3)(a) and (4) override the capital limitation; the general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, arrangement, associated person, business, capital limitation, deduction, employee, employment income, general limitation, general permission, income year, pay, supplement, time of the sale,
Compare: 2004 No 35 s DC 9
DC 11 Transfers of employment income obligations to associates
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When this section applies
(1) This section applies when—
(a) an employee of a person (person A) becomes an employee of another person (person B); and
(b) person A and person B are associated persons at the time; and
(c) person B assumes person A’s obligation to pay an amount of employment income to the employee; and
(d) the employee’s becoming an employee of person B does not result from the sale by person A of a business, or a part of a business, to person B.
Deduction
(2) Person B is allowed a deduction for the amount of employment income if person A would have been allowed a deduction for the amount if the transfer had not occurred.
Link with subpart DA
(3) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, associated person, business, capital limitation, deduction, employee, employment income, general limitation, general permission, pay,
Compare: 2004 No 35 s DC 10
DC 12 Loans to employees under share purchase schemes
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Deduction
(1) An employing company that provides financial assistance to an employee by way of an interest-free loan under a share purchase scheme is allowed a deduction for providing the assistance, under the following conditions:
(a) the scheme must have the Commissioner’s approval, which must be given if the scheme meets all the criteria set out in sections DC 13 and DC 14; and
(b) the deduction is allowed only for the 5 years after the date of the loan.
Amount, and timing, of deduction
(2) The amount of the deduction in each income year is equal to the interest that would have been payable by the employing company for the income year if the amount of the loan had been borrowed by the company at an interest rate of 10% annually with interest calculated with monthly rests, and as if repayments by the employee under the scheme were repayments of the notional loan by the company.
Shares issued by another group company
(3) Subsection (4) applies when—
(a) an employing company is a member of a group of companies; and
(b) an employee of the employing company acquires under a share purchase scheme a share issued by another company (the issuing company) in the group; and
(c) financial assistance is provided to the employee by way of an interest-free loan under the share purchase scheme; and
(d) the scheme has the Commissioner’s approval, which must be given if the scheme meets all the criteria set out in sections DC 13 and DC 14.
Deduction for issuing company
(4) The issuing company is entitled to the deduction that the employing company would have been allowed under subsections (1) and (2) had the employing company provided the loan. The employing company is not allowed a deduction for the loan under those subsections.
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, Commissioner, company, deduction, employee, employing company, general limitation, general permission, group of companies, income year, interest, pay, share, share purchase scheme, supplement, year,
Compare: 2004 No 35 s DC 11
DC 13 Criteria for approval of share purchase schemes: before period of restriction ends
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What this section does
(1) This section sets out the criteria, relating to the provisions of a share purchase scheme on the period of restriction, that the Commissioner applies in determining whether or not to approve the scheme.
Purchase of shares
(2) The scheme must provide for—
(a) the shares to be available for no more than their market value at the date of purchase or subscription; and
(b) the amount that an employee spends on buying shares under the scheme or any similar scheme to be $2,340 or less in a 3 year period.
Eligibility
(3) The scheme must provide for—
-
(a) employees to be eligible to participate equally in the scheme, that is,—
(i) every full-time permanent employee on an equal basis with every other full-time permanent employee; and
(ii) if the scheme applies to part-time employees and seasonal employees, every part-time employee on an equal basis with every other part-time employee and every seasonal employee on an equal basis with every other seasonal employee; and
-
(b) any minimum period of employment or service before employees are eligible to participate,—
(i) for full-time employees, to be no more than 3 years’ full-time work; and
(ii) for other employees, an accumulated period that is the equivalent of 3 years’ full-time work.
Loans to employees
(4) The scheme must provide for—
(a) a loan to an employee to buy shares to be free of interest and other charges; and
(b) any minimum amount of loan to be $624 or less; and
(c) employees to be able to repay the loan by regular equal instalments at intervals of 1 month or less over a period of between 3 years and 5 years from the date of the loan; and
(d) employees to be able to choose to repay some or all of the loan before the due date for repayment.
Shares held on trust
(5) The scheme must provide for—
(a) the trustee of the scheme to hold the shares in trust for the employee; and
(b) the trustee to pay any dividends directly to the employee; and
(c) the dividends to be treated as having been derived by the employee; and
(d) the employee to be prohibited from putting any dividends towards the repayment of any sum that the employee owes to the company or to the trustee; and
(e) the employee to be prohibited from charging or disposing of their rights or interests in the shares.
Hardship
(6) The scheme must provide for a trustee who is satisfied that the employee’s continued participation in the scheme has resulted or would result in serious hardship,—
(a) with the employee’s agreement, to vary the terms of the repayment of a loan under the scheme; or
(b) with the employee’s agreement, to allow the employee to withdraw from the scheme as if they had ended their employment in the circumstances described in section DC 14(4).
Withdrawal from scheme
(7) The scheme must provide for—
(a) an employee to be able to withdraw from the scheme on giving 3 months’ notice to the trustee; and
(b) the employee to be treated for the purposes of the scheme as if they ended their employment with the company on the date the notice takes effect, with the effect that section DC 14(4) and (5) then apply.
Defined in this Act: amount, Commissioner, company, dividend, employee, interest, notice, pay, period of restriction, share, share purchase scheme, trustee, year,
Compare: 2004 No 35 s DC 12
DC 14 Criteria for approval of share purchase schemes: when period of restriction ends
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What this section does
(1) This section sets out the criteria, relating to the provisions of a share purchase scheme on the period when the period of restriction ends, that the Commissioner applies in determining whether or not to approve the scheme.
General rule
(2) The scheme must provide for—
-
(a) the trustee—
(i) to transfer the shares to the employee if the employee is still employed by the company; or
(ii) at the option of the employee, to buy the shares at their market value on the date of purchase; or
(b) the trustee to apply subsection (3) or (4), if either applies, in priority to paragraph (a).
Death, accident, sickness, redundancy, or retirement at normal retiring age
(3) If the period of restriction ends because the employee ends their employment through death, accident, sickness, redundancy, or retirement at normal retiring age, the scheme must provide for—
(a) the trustee to transfer the shares to the legal representative of the employee’s estate or to the former employee; or
(b) at the option of the legal representative or former employee, the trustee to buy the shares at their market value on the date of purchase, subject to the repayment of any outstanding loan under the scheme for the shares.
Employment ends for other reason
(4) If the period of restriction ends because the employee ends their employment for any reason other than one described in subsection (3), the scheme must provide for the trustee to buy the shares at their market value on the date on which the employee ends their employment, subject to the repayment of any outstanding loan under the scheme for the shares.
Purchase price when trustee buys shares
(5) If the trustee buys the shares when the period of restriction ends, the scheme must provide for the purchase price to be no more than the price paid for the shares by the employee.
Defined in this Act: Commissioner, company, employee, normal retiring age, pay, period of restriction, share, share purchase scheme, trustee,
Compare: 2004 No 35 s DC 13
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DC 15 Some definitions
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Definitions
(1) In this section, and in sections DC 12 to DC 14,—
employee—
(a) means a person employed by a company:
-
(b) does not include—
(i) a director of the company; or
(ii) a person who, with any associated person, holds 10% or more of the issued capital of the company; or
(iii) a company, a local authority, a public authority, or an unincorporated body of persons
employing company, for an employee, means the company that employs the employee
normal retiring age means,—
(a) for an employee other than one to whom paragraph (b) applies, no less than 60 years of age:
(b) for a female employee who is entitled under a contract of employment entered into before 1 April 1978 with the employing company to retire before 60 years of age, no less than 55 years of age:
(c) for any employee, an age that is earlier than the age referred to in paragraph (a) or (b) and that the Commissioner considers reasonable given the nature of the employment or the general terms of employment in the business or occupation of the employee
share, for a company whose shares are made available under a share purchase scheme, means a fully paid ordinary share that ranks equally with, and has the same designation as, an existing ordinary voting share in the company
trustee means a person or group of persons appointed to administer a share purchase scheme of an employing company, and to hold shares under that scheme on trust for an employee during the period of restriction.
Meaning of period of restriction
(2) In this section, and in sections DC 13 and DC 14,—
(a) period of restriction is defined in subsections (3) and (4); and
(b) for the purposes of this definition, if an employing company is part of a group of companies, and an employee is transferred to another company in the group, the employee is treated as continuing in their employment.
Shorter of 2 periods
(3) Period of restriction means the shorter of—
(a) a period of 3 years starting on the date the employee buys or subscribes for the shares, or the period of repayment of a loan made to them under the scheme for this purpose, whichever is longer; and
(b) a period starting on the date the employee buys or subscribes for the shares and ending on the date the employee ends their employment with the employing company.
This subsection is overridden by subsection (4).
Different period
(4) If the employee buys or subscribes for the shares at market value, and the rules of the scheme provide a period of restriction, that period applies, but it must be no shorter than the period of repayment of a loan made under the scheme for the purpose, and must be no longer than the period described in subsection (3) that would apply in the absence of this subsection.
Defined in this Act: associated person, company, director, employee, employing company, group of companies, group of persons, local authority, normal retiring age, pay, period of restriction, public authority, share, share purchase scheme, trustee, year,
Compare: 2004 No 35 s DC 14
Subpart DD—Entertainment expenditure
DD 1 Entertainment expenditure generally
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When this subpart applies
(1) This subpart applies when, in deriving income, a person incurs expenditure on entertainment that provides both a private and a business benefit.
No deduction (with exception)
(2) The person is denied a deduction for expenditure that they incur on the forms of entertainment set out in section DD 2, except for 50% of the amount that they would have been allowed in the absence of this subsection.
Meaning of limitation rule
(3) Limitation rule means the rule described in subsection (2).
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: amount, business, deduction, general permission, income, limitation rule,
Compare: 2004 No 35 s DD 1
DD 2 Limitation rule
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What rule applies to
(1) The expenditure to which the limitation rule applies is expenditure on the forms of entertainment described in subsections (2) to (6).
Corporate boxes
(2) The limitation rule—
-
(a) applies to deductions for expenditure on corporate boxes, corporate marquees or tents, or other exclusive areas, whether temporary or permanent, at—
(i) cultural, sporting, or other recreational events:
(ii) activities taking place off the person’s business premises; and
(b) applies to the cost of tickets or other rights of entry to the areas; and
(c) applies to the cost of food and drink incidental to this form of entertainment.
Holiday accommodation
(3) The limitation rule—
(a) applies to deductions for expenditure on accommodation in a holiday home, time-share apartment, or similar leisure venue; and
(b) does not apply to accommodation that is merely incidental to business activities or employment duties; and
(c) applies to the cost of food and drink incidental to this form of entertainment.
Pleasure craft
(4) The limitation rule—
(a) applies to deductions for expenditure on yachts or other pleasure craft; and
(b) applies to the cost of food and drink incidental to this form of entertainment.
Entertainment off premises
(5) The limitation rule applies to deductions for expenditure on food and drink that a person provides off their business premises.
Entertainment on premises
(6) The limitation rule applies to deductions for expenditure on food and drink that a person provides, other than light refreshments such as a morning tea and whether or not guests are present,—
(a) on their business premises at a celebration meal, party, reception, or other similar social function:
(b) in an area of the premises that at the time is reserved for senior employees to use and is not open to all the person’s employees working in the premises.
Meaning of expenditure
(7) Expenditure includes,—
-
(a) in subsections (2) to (4),—
(i) an amount of depreciation loss; and
(ii) expenditure or loss on running costs and maintenance and similar matters; and
(iii) a deduction for a lease premium under section DZ 9 (Premium paid on land leased before 1 April 1993); and
(b) in subsections (2) to (6), any incidental expenditure on matters such as hireage of crockery, glassware, or utensils, waiting staff, and music or other entertainment provided in association with the specified kind of entertainment.
Defined in this Act: amount, business, business premises, deduction, depreciation loss, expenditure, limitation rule, pay,
Compare: 2004 No 35 s DD 2
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DD 3 When limitation rule does not apply
-
The limitation rule is either restricted in its application or does not apply to deductions for the expenditure described in sections DD 4 to DD 8.
Defined in this Act: deduction, limitation rule,
Compare: 2004 No 35 s DD 3
DD 4 Employment-related activities
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Business travel expenditure
(1) The limitation rule does not apply to a deduction for expenditure on food or drink consumed by a person while travelling in the course of business or for their employment duties. However, the limitation rule applies if—
(a) the travel is mainly for the purpose of enjoying entertainment; or
(b) the food or drink is consumed at a meal or function involving an existing or potential business contact as a guest; or
(c) the food or drink is consumed at a celebration meal, party, reception, or other similar social function.
Conference expenditure
(2) The limitation rule does not apply to a deduction for expenditure on light refreshments at a conference or educational course or similar event, nor to food or drink consumed at such an event lasting for at least 4 consecutive hours, excluding meal times. However, the limitation rule applies if the event is mainly for the purpose of entertainment.
Expenditure on employees’ meals
(3) The limitation rule does not apply to a deduction for expenditure on—
(a) a reasonable amount of food or drink provided as a meal allowance, or the reimbursement of the cost of the food and drink, when an employee works overtime, if the allowance or reimbursement is exempt income under section CW 17 (Expenditure on account, and reimbursement, of employees):
(b) a light meal consumed as part of the employee’s employment duties in an area of the person’s business premises that at the time is reserved for senior employees and their guests to use and is not open to all the person’s employees working in the premises.
Defined in this Act: business, business contacts, business premises, deduction, employee, exempt income, limitation rule,
Compare: 2004 No 35 s DD 4
DD 5 Promoting businesses, goods, or services
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Sponsored promotions
(1) The limitation rule does not apply to a deduction for expenditure on entertainment if—
(a) the entertainment is sponsored mainly to advertise or promote a person’s business, goods, or services to the public; and
-
(b) none of the following has a greater opportunity to enjoy the entertainment than the public generally:
(i) existing business contacts of the person or the person whose business, goods, or services are being advertised or promoted:
(ii) employees of the person or the person whose business, goods, or services are being advertised or promoted:
(iii) anyone associated with the person or the person whose business, goods, or services are being advertised or promoted.
Incidental costs of promotion
(2) The limitation rule does not apply to a deduction for expenditure on entertainment that is merely an incidental part of—
(a) a trade display mainly held to advertise or promote a business, goods, or services:
(b) a function open to the public and mainly held to advertise or promote a business, goods, or services.
Samples
(3) The limitation rule does not apply to a deduction for expenditure on samples that a person provides for promotion or advertising purposes to anyone who is not an employee of or associated with the person.
Entertainment for review
(4) The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides to a person who is reviewing the entertainment for a book, magazine, paper, or other medium of communication.
Defined in this Act: associated person, business, business contacts, deduction, employee, limitation rule,
Compare: 2004 No 35 s DD 5
DD 6 Entertainment as business or for charitable purpose
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Entertainment as business
(1) The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides for market value or in an arm’s length transaction in the ordinary course of their business, if that business is to provide 1 or more of the forms of entertainment referred to in section DD 2.
Entertainment for charitable purposes
(2) The limitation rule does not apply to a deduction for expenditure on entertainment that a person provides to members of the public for charitable purposes.
Defined in this Act: business, charitable purpose, deduction, limitation rule,
Compare: 2004 No 35 s DD 6
DD 7 Entertainment outside New Zealand
-
The limitation rule does not apply to a deduction for expenditure on entertainment that is enjoyed or consumed outside New Zealand.
Defined in this Act: deduction, limitation rule, New Zealand,
Compare: 2004 No 35 s DD 7
DD 8 Entertainment that is income or fringe benefit
-
The limitation rule does not apply to a deduction for expenditure on entertainment that is—
(a) income of the person who consumes it; or
(b) a fringe benefit to which fringe benefit tax applies.
Defined in this Act: deduction, fringe benefit, fringe benefit tax, income, limitation rule,
Compare: 2004 No 35 s DD 8
DD 9 Relationship with fringe benefit tax rules
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Sections DD 2 to DD 8 override the fringe benefit tax (FBT) rules. However, the FBT rules, as applied by section CX 29 (Entertainment), override sections DD 2 to DD 8 if an employee of the person providing the benefit—
(a) may choose when to receive or use the benefit:
(b) does not receive or use the benefit in the course of their employment duties.
Defined in this Act: employee, FBT rules,
Compare: 2004 No 35 s DD 9
DD 10 Interpretation: reimbursement and apportionment
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In sections DD 2 to DD 8,—
(a) a person is treated as having incurred expenditure on entertainment described in section DD 2 if they pay an allowance for, or reimburse an employee’s expenditure on, the entertainment, and the allowance or reimbursement is exempt income under section CW 17 (Expenditure on account, and reimbursement, of employees):
(b) if a person incurs expenditure that relates only partly to the entertainment, the expenditure must be apportioned appropriately.
Defined in this Act: employee, exempt income, pay,
Compare: 2004 No 35 s DD 10
DD 11 Some definitions
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In this subpart,—
business includes any recurring income-earning activity
business contacts—
-
(a) includes, for a person,—
(i) their clients, customers, shareholders, other financiers, and suppliers:
(ii) the clients, customers, shareholders, other financiers, and suppliers of an associated person:
(b) if the person is in partnership, does not include other partners in the partnership
business premises—
(a) means the normal business premises or a temporary workplace of the person (or an associate):
(b) does not include premises or a workplace established mainly for the purpose of enjoying entertainment.
Defined in this Act: associated person, business, business contacts, business premises, shareholder,
Compare: 2004 No 35 s DD 11
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Subpart DE—Motor vehicle expenditure
Introductory provisions
DE 1 What this subpart does
-
Apportions motor vehicle expenditure
(1) This subpart sets out the rules for determining the proportion of business use of a motor vehicle to its total use when a person uses a motor vehicle partly for business purposes and partly for other purposes.
Exclusions
(2) This subpart does not apply—
(a) to a company:
(b) to a person whose only income is income from employment:
-
(c) to a motor vehicle that is used only—
(i) for the purpose of deriving income; or
(ii) for a purpose that constitutes a fringe benefit.
Defined in this Act: business use, company, fringe benefit, income, income from employment, motor vehicle,
Compare: 2004 No 35 s DE 1
DE 2 Deductions for business use
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Deduction
(1) A person is allowed a deduction for—
(a) expenditure that they incur for the business use of a motor vehicle:
(b) an amount of depreciation loss for the business use of a motor vehicle.
Amount, and timing, of deduction: expenditure
(2) The amount of the deduction allowed in an income year for the expenditure for the business use of the vehicle is calculated using the formula—
expenditure × business proportion.
Definition of item in formula
(3) In the formula in subsection (2), business proportion is the proportion of business use of the motor vehicle for the income year, expressed as a decimal, calculated under sections DE 3 to DE 12.
Amount, and timing, of deduction: depreciation loss
(4) The amount of the deduction allowed in an income year for the amount of depreciation loss for the business use of the vehicle is calculated—
(a) using the formula in subsection (5), except in a case to which paragraph (b) or (c) applies; or
(b) using the formula in subsection (8) if that subsection applies to the amount of depreciation loss; or
(c) using the formula in subsection (11) if that subsection applies to the amount of depreciation loss.
Calculation of deduction: depreciation loss generally
(5) The formula referred to in subsection (4)(a) is—
standard calculation × business proportion.
Definition of items in formula
(6) In the formula in subsection (5),—
(a) standard calculation is the amount resulting from a calculation made for the motor vehicle under section EE 16 (Amount resulting from standard calculation):
(b) business proportion is the proportion of business use of the motor vehicle for the income year (expressed as a decimal) calculated under sections DE 3 to DE 12.
When subsection (8) applies
(7) Subsection (8) applies when—
(a) the amount of depreciation loss results from a calculation made for the motor vehicle under section EE 48(2) (Effect of disposal or event); and
(b) the person’s amount of depreciation loss for the motor vehicle was, at a time when the person owned it, calculated under subsection (5).
Calculation of deduction: depreciation loss on disposal
(8) The formula referred to in subsection (4)(b) is—
Definition of items in formula
(9) In the formula in subsection (8),—
(a) disposal depreciation loss is the amount resulting from a calculation made for the vehicle under section EE 48(2):
(b) all deductions is all amounts of depreciation loss relating to the vehicle for which the person has been allowed a deduction in each of the income years in which the person has owned the vehicle:
(c) base value has the applicable one of the meanings in sections EE 57 to EE 60 (which relate to base value):
(d) adjusted tax value is the vehicle’s adjusted tax value on the date on which the disposal or event occurs.
When subsection (11) applies
(10) Subsection (11) applies when—
(a) the amount of depreciation loss results from a calculation made for the motor vehicle under section EE 48(2); and
(b) the motor vehicle starts to have a business use in the same income year as that in which the amount of depreciation loss arose.
Calculation of deduction: depreciation loss on disposal after business use
(11) The formula referred to in subsection (4)(c) is—
disposal depreciation loss × business proportion.
Definition of items in formula
(12) In the formula in subsection (11),—
(a) disposal depreciation loss is the amount resulting from a calculation made for the vehicle under section EE 48(2):
(b) business proportion is the proportion of business use of the vehicle for the income year calculated under sections DE 3 to DE 12, expressed as a decimal.
Link with subpart DA
(13) This section supplements the general permission and overrides the private limitation. The other general limitations still apply.
Defined in this Act: adjusted tax value, amount, business use, deduction, depreciation loss, general limitation, general permission, income year, motor vehicle, own, private limitation, supplement,
Compare: 2004 No 35 s DE 2
DE 3 Methods for calculating proportion of business use
-
The 3 methods that may be used to calculate the proportion of business use of a motor vehicle are—
(a) actual records, seesection DE 5:
(b) a logbook, seesections DE 6 to DE 11:
(c) mileage rates, seesection DE 12.
Defined in this Act: business use, motor vehicle,
Compare: 2004 No 35 s DE 3
DE 4 Default method for calculating proportion of business use
-
When this section applies
(1) This section applies when—
(a) a person has not maintained actual records to show the proportion of business use of a motor vehicle; or
(b) a period is not a term to which a proportion of business use of a motor vehicle established by a logbook applies; or
(c) a person cannot use the mileage rate method.
Amount of deduction
(2) The deduction under section DE 2 for expenditure or loss incurred is limited to the lesser of—
(a) the proportion of actual business use of the vehicle; and
(b) 25% of the total use of the vehicle.
Defined in this Act: amount, business use, deduction, motor vehicle,
Compare: 2004 No 35 s DE 4
Actual records
DE 5 Actual records
-
To determine the proportion of business use of a motor vehicle, a person may use actual records showing the reasons for and the distance of journeys by a motor vehicle for business purposes. However, when the period covered falls within a logbook term, actual records may be used only if the person and the Commissioner agree.
Defined in this Act: business use, Commissioner, logbook term, motor vehicle,
Compare: 2004 No 35 s DE 5
Logbook
DE 6 Using logbook for test period
-
A person may keep a logbook for a test period for the purpose of establishing the proportion of the business use of a motor vehicle for an income year, or part of an income year, that falls within a logbook term. If a person uses a logbook as a method of establishing the proportion of business use, they must also record the total distance travelled in each income year, or part of an income year, that falls within a logbook term.
Defined in this Act: business use, income year, logbook term, motor vehicle,
Compare: 2004 No 35 s DE 6
DE 7 Logbook requirements
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Test period
(1) When a logbook is used to establish the proportion of business use of a motor vehicle, a person must select a start date, and keep the logbook for at least 90 consecutive days at a time that represents, or is likely to represent, the average proportion of travel by the vehicle for business purposes during the logbook term.
Record of reasons for, and distance of, journeys
(2) The logbook must record—
(a) the start and end of the 90 day test period; and
(b) the vehicle’s odometer readings at the start and end of the test period; and
(c) the distance of each business journey; and
(d) the date of each business journey; and
(e) the reason for each business journey; and
(f) any other detail that the Commissioner may require.
Defined in this Act: business, business use, Commissioner, logbook term, motor vehicle,
Compare: 2004 No 35 s DE 7
DE 8 Logbook term
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Meaning of logbook term
(1) A logbook term is a period to which the proportion of business use of a motor vehicle established by the logbook applies. The term lasts up to 3 years and starts and ends as described in subsections (2) and (3).
Start of term
(2) A logbook term starts on the date that is the latest of the following days:
(a) the first day of the income year in which a person starts to keep a logbook:
(b) the day that a person acquires the motor vehicle, unless the vehicle is a replacement vehicle, which is dealt with in section DE 11:
(c) the day immediately after the last day of the previous logbook term:
(d) a day that a person specifies.
End of term
(3) The logbook term ends on the date that is the earliest of the following days:
(a) the day that a person disposes of the motor vehicle without replacing it:
(b) the day that is 3 years after the first day of the income year in which the logbook term started:
(c) a day that the Commissioner specifies under section DE 9:
(d) a day that a person specifies.
Defined in this Act: business use, Commissioner, income year, logbook term, motor vehicle, year,
Compare: 2004 No 35 s DE 8
DE 9 Inadequate logbook
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Non-representative logbook proportion
(1) If the Commissioner considers that the proportion of business use recorded in a logbook does not, or does no longer, represent the average use of a motor vehicle for business purposes during an income year that falls within a logbook term, the Commissioner may,—
(a) within the logbook term, direct a person to keep a further logbook and specify another 90 day period in the logbook term for keeping the logbook; or
(b) treat a person as not having kept a logbook that applies to the logbook term.
Further logbook
(2) If the Commissioner directs a person to keep a further logbook, and the proportion of business use calculated under that logbook is less by at least 20% than the proportion under the first logbook, the Commissioner may find that the first logbook—
(a) represented the average use of the motor vehicle for business purposes for only part of the logbook term; or
(b) did not represent that use at all.
Partly representative logbook
(3) If subsection (2)(a) applies, the Commissioner may determine a date on which the application of the first logbook ended, and the further logbook applies to a new logbook term that starts on the day after that date.
Non-representative logbook
(4) If subsection (2)(b) applies, the Commissioner may direct that the further logbook applies for the logbook term to which the first logbook applied.
Defined in this Act: business use, Commissioner, income year, logbook term, motor vehicle,
Compare: 2004 No 35 s DE 9
DE 10 Variance during logbook term
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If, in any month during a logbook term, the proportion of business use in that month is less by at least 20% than the proportion established by the logbook, and the proportion of business use recorded in the logbook no longer represents the average use of the motor vehicle for business purposes, the logbook term must end on the last day of that month.
Defined in this Act: business use, logbook term, motor vehicle,
Compare: 2004 No 35 s DE 10
DE 11 Replacement vehicles
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For the purpose of establishing the proportion of business use of a motor vehicle, a replacement vehicle is treated in the same way as the vehicle it replaces if—
(a) the logbook is likely to be representative of the average travel for business purposes for the remainder of the logbook term; and
(b) from the date of replacement, a person keeps a record of the total distance travelled by the replacement vehicle for each income year, or part of an income year, of the remaining logbook term.
Defined in this Act: business use, income year, logbook term, motor vehicle,
Compare: 2004 No 35 s DE 11
Mileage rates
DE 12 Mileage rate method
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Using mileage rates
(1) If a person’s business travel is 5,000 kilometres or less in an income year, they may use the mileage rate method to calculate the expenditure or loss on a motor vehicle that represents the proportion of business use of the vehicle.
Amount of deduction
(2) Under the mileage rate method, the person must keep details of the business use of the motor vehicle and calculate the mileage travelled for business purposes for the income year. The amount of the deduction under this method is found by multiplying the mileage rate by the distance that reflects the proportion of business use of the vehicle for the income year.
Setting mileage rates
(3) For the purposes of this section, the Commissioner must from time to time set and publish a mileage rate.
Defined in this Act: amount, business, business use, Commissioner, deduction, income year, motor vehicle,
Compare: 2004 No 35 s DE 12
Subpart DF—Government grants and compensation
DF 1 Government grants to businesses
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When subsection (2) applies
(1) Subsection (2) applies when—
(a) a payment is granted by a local authority or a public authority to a person for a business carried on by the person; and
(b) the payment is in the nature of a grant or subsidy, or is a grant-related suspensory loan, but is not otherwise a payment in the nature of an advance or loan; and
(c) the payment is made to the person for expenditure that they incur, other than in a way described in subsection (3); and
(d) the person would be allowed a deduction for the expenditure in the absence of this section; and
(e) the payment is excluded income under section CX 47 (Government grants to businesses).
No deduction (with exception)
(2) The person is denied, to the extent of the amount of the payment, the deduction that they would have been allowed in the absence of this section.
When subsection (4) applies
(3) Subsection (4) applies when—
(a) a payment is granted by a local authority or a public authority to a person for a business carried on by the person; and
(b) the payment is in the nature of a grant or subsidy, or is a grant-related suspensory loan, but is not otherwise a payment in the nature of an advance or loan; and
(c) the payment is made to the person for expenditure that they incur in acquiring, constructing, installing, or extending an item of depreciable property; and
(d) the person owns the item; and
(e) the person is allowed a deduction for an amount of depreciation loss for the item.
Amount of depreciation loss
(4) For the purpose of quantifying the amount of depreciation loss, the amount of the expenditure is reduced by the amount of the payment.
Amendment of assessment
(5) Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to this section.
Exclusion
(6) This section does not apply to a large budget screen production grant.
Link with subpart DA
(7) This section overrides the general permission.
Defined in this Act: amount, assessment, business, Commissioner, deduction, depreciable property, depreciation loss, general permission, grant-related suspensory loan, large budget screen production grant, local authority, pay, public authority, time bar,
Compare: 2004 No 35 s DF 1
DF 2 Repayment of grant-related suspensory loans
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Deduction
(1) A person is allowed a deduction for the amount of a repayment that they are required to make of some or all of a grant-related suspensory loan to the extent to which the amount relates to a payment to which section DF 1(2) applies.
Timing of deduction
(2) The deduction is allocated to the income year in which repayment is first required.
Amount of depreciation loss
(3) If a person is required to repay some or all of a grant-related suspensory loan, then, to the extent to which section DF 1(3) and (4) apply to the loan,—
(a) the person is allowed a deduction for an amount of depreciation loss for the item; and
(b) the amount of depreciation loss is the total of the amounts of depreciation loss for the item for which the person would have been allowed a deduction if section DF 1(3) and (4) had not applied.
Quantifying amount of depreciation loss
(4) For the purpose of quantifying the amount of depreciation loss for the item in the income year and in later income years, the following matters must be taken into account:
(a) the amount of the deduction under subsection (3); and
(b) the total of the amounts of depreciation loss for the item for which the person has been allowed a deduction; and
(c) the person’s expenditure on acquiring, constructing, installing, or extending the item.
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation for the amount described in subsection (1). The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, depreciation loss, general limitation, general permission, grant-related suspensory loan, income year, pay, supplement,
Compare: 2004 No 35 s DF 2
DF 3 Identifying expenditure for purposes of sections DF 1 and DF 2
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For the purposes of sections DF 1 and DF 2, a statement by a person making a grant-related suspensory loan as to the expenditure that relates to the loan or to the repayment of the loan provides conclusive evidence on the questions.
Defined in this Act: grant-related suspensory loan, pay,
Compare: 2004 No 35 s DF 3
DF 4 Accident compensation payment for attendant care
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When this section applies
(1) This section applies when a person receives an accident compensation payment for attendant care as described in paragraph (g) of the definition of that term in section CF 1(2) (Benefits, pensions, compensation, and government grants) that is assessable income of the person.
Deduction
(2) The person is allowed a deduction for the amount paid to a caregiver for attendant care.
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation and private limitation for the amount described in subsection (2). The other general limitations still apply.
Defined in this Act: accident compensation payment, assessable income, capital limitation, general limitation, general permission, income year, pay, private limitation,
Compare: 2004 No 35 s DF 4
Subpart DN—Attributed losses from foreign equity
Attributed controlled foreign company (CFC) loss
DN 1 Attributed controlled foreign company loss
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Deduction
(1) A person is allowed a deduction for an attributed controlled foreign company (CFC) loss, subject to the jurisdictional ring-fencing rule in section DN 4.
Link with subpart DA
(2) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: attributed CFC loss, capital limitation, deduction, general limitation, general permission, supplement,
Compare: 2004 No 35 s DN 1
DN 2 When attributed CFC loss arises
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A person has an attributed CFC loss from a foreign company in an income year if—
(a) the foreign company is a CFC at any time during 1 of its accounting periods, under sections EX 1 to EX 7 (which relate to the definition of a controlled foreign company); and
(b) the accounting period ends during the income year; and
(c) the person has an income interest in the foreign company for the accounting period, under sections EX 8 to EX 13 (which relate to calculating a person’s income interest); and
(d) at any time in the accounting period, the person is a New Zealand resident who is not a transitional resident; and
(e) the person’s income interest is 10% or more for the accounting period, under sections EX 14 to EX 17 (which relate to the 10% threshold); and
(f) the CFC has a branch equivalent loss for the accounting period, under section EX 21 (Branch equivalent income or loss: calculation rules); and
(g) the CFC is not an unqualified grey list CFC for the accounting period, under section EX 22 (Unqualified grey list CFCs).
Defined in this Act: accounting period, attributed CFC loss, branch equivalent loss, CFC, foreign company, grey list, income interest, income year, New Zealand resident, transitional resident,
Compare: 2004 No 35 s DN 2
DN 3 Calculation of attributed CFC loss
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The amount of an attributed CFC loss is calculated under sections EX 18 to EX 20 (which relate to the calculation of attributed CFC income or loss).
Defined in this Act: amount, attributed CFC loss,
Compare: 2004 No 35 s DN 3
DN 4 Ring-fencing cap on deduction
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Amount of deduction
(1) The deduction that a person is allowed for an attributed CFC loss from a CFC in an income year is no more than the total of—
(a) any attributed CFC income of the person for the income year from another CFC that is resident in the same country as the first CFC for the relevant accounting period; and
(b) any foreign investment fund (FIF) income of the person for the income year calculated under the branch equivalent method from a FIF that is resident in the same country.
Income only once
(2) When subsection (1) is applied to an attributed CFC loss, an amount of attributed CFC income or FIF income may be used only to the extent to which the income is not used when—
(a) subsection (1) is applied to another attributed CFC loss; or
(b) section DN 8 is applied to a FIF loss.
Relationship with subpart IQ
(3) Any excess not able to be deducted because of subsection (1) is an attributed CFC net loss able to be used under sections IQ 2, IQ 4, and IQ 9 (which relate to the use of attributed CFC net losses).
Defined in this Act: accounting period, amount, attributed CFC income, attributed CFC loss, attributed CFC net loss, branch equivalent method, CFC, deduction, FIF, FIF income, FIF loss, income year,
Compare: 2004 No 35 s DN 4
Foreign investment fund (FIF) loss
DN 5 Foreign investment fund loss
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Deduction
(1) A person is allowed a deduction for a FIF loss.
Ring-fencing rule for loss calculated under branch equivalent method
(2) The deduction for a FIF loss calculated under the branch equivalent method is subject to the jurisdictional ring-fencing rule in section DN 8.
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: branch equivalent method, calculation method, capital limitation, deduction, FIF loss, general limitation, general permission, supplement,
Compare: 2004 No 35 s DN 5
DN 6 When FIF loss arises
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General rule
(1) A person has a FIF loss in an income year if,—
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(a) at any time in the year, the person has—
(i) rights in a foreign company, or a foreign superannuation scheme, or an entity listed in schedule 25, part A (Foreign investment funds); or
(ii) rights under a life insurance policy issued by a non-resident; and
(b) at that time, the rights are an attributing interest in a FIF under section EX 29 (Attributing interests in FIFs); and
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(c) at that time, the rights are not exempt from being an attributing interest in a FIF under any of—
(i) the exemption for ASX-listed Australian companies in section EX 31 (Exemption for ASX-listed Australian companies):
(ii) the exemption for Australian unit trusts with 25% turnover in section EX 32 (Exemption for Australian unit trusts with 25% turnover):
(iii) the exemption for Australian regulated superannuation savings in section EX 33 (Exemption for Australian regulated superannuation savings):
(iv) the CFC regime exemption in section EX 34 (CFC rules exemption):
(v) the exemption for a 10% or greater interest in a grey list company in section EX 35 (Exemption for 10% or greater interest in grey list company):
(vi) the 10-year exemption for a venture capital company emigrating to a grey list country in section EX 36 (Venture capital company emigrating to grey list country: 10-year exemption):
(vii) the 10-year exemption for a grey list company owning a New Zealand venture capital company in section EX 37 (Grey list company owning New Zealand venture capital company: 10-year exemption):
(viii) the exemption for an employee share purchase scheme of a grey list company in section EX 38 (Exemption for employee share purchase scheme of grey list company):
(ix) the terminating exemption for a grey list company with numerous New Zealand shareholders in section EX 39 (Terminating exemption for grey list company with numerous New Zealand shareholders):
(x) the terminating exemption for a grey list company investing in Australasian equities in section EZ 32 (Terminating exemption for grey list FIF investing in Australasian listed equities):
(xi) the foreign exchange control exemption in section EX 40 (Foreign exchange control exemption):
(xii) the exemption for a non-resident or transitional resident, in section EX 41 (Income interest of non-resident or transitional resident):
(xiii) the immigrant’s accrued superannuation entitlement exemption in section EX 42 (New resident’s accrued superannuation entitlement exemption):
(xiv) the annuity or pension exemption in section EX 43 (Non-resident’s pension or annuity exemption); and
(d) if the person is a natural person and not acting as a trustee, the total cost, calculated under section EX 68 (Measurement of cost), of attributing interests in FIFs that the person holds at any time during the income year when the person is a New Zealand resident is more than $50,000:
(e) if the person is acting as trustee of a trust that meets the requirements of subsection (4), the total cost, calculated under section EX 68, of attributing interests in FIFs that the person holds at any time during the year is more than $50,000; and
(f) at any time in the year, the person is a New Zealand resident who is not a transitional resident and holds the attributing interest; and
(g) under the relevant calculation method chosen by the person, a loss amount is calculated for the income year or relevant accounting period under sections EX 44 to EX 56 (which relate to the calculation of FIF income or loss), EX 60 or EX 61 (which relate to top-up FIF income).
Look-through calculation methods
(2) Despite subsection (1), if the calculation method is the accounting profits method or branch equivalent method,—
(a) FIF loss arises in the income year only if the relevant accounting period of the FIF ends during the year; and
(b) the tests in subsection (1)(a), (b), (c), and (f) are applied on the basis that references in subsection (1)(a), (b), (c), and (f) to any time in the income year are read as references to any time in the relevant accounting period.
Special rule: CFC with FIF interest
(3) A person with an income interest of 10% or more in a CFC can also have a FIF loss in an income year under the special rule in section EX 58 (Additional FIF income or loss if CFC owns FIF), which applies when a CFC has an attributing interest in a FIF, whether or not the CFC is an unqualified grey list CFC under section EX 22 (Unqualified grey list CFCs).
Requirements for trustees
(4) Subsection (1)(e) applies to the trustee of a trust for an income year if—
(a) the trust is of the estate of a deceased person and the income year begins on or before the day that is 5 years after the person’s death:
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(b) the settlor of the trust—
(i) is a relative or legal guardian of a beneficiary of the trust, or a person associated with a relative or legal guardian of a beneficiary of the trust; and
(ii) is required by a court order to pay damages or compensation to the beneficiary:
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(c) the settlor of the trust—
(i) is the estate of a deceased person; and
(ii) is required by a court order to settle on the trust the proceeds of damages or compensation for the beneficiaries of the trust:
(d) the settlor of the trust is the Accident Compensation Corporation.
Defined in this Act: accounting period, accounting profits method, amount, attributing interest, branch equivalent method, calculation method, CFC, FIF, FIF loss, foreign company, foreign superannuation scheme, grey list, grey list company, income interest, income year, life insurance policy, New Zealand resident, non-resident, relative, share, shareholder, transitional resident, trustee, unit trust,
Compare: 2004 No 35 s DN 6
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DN 7 Calculation of FIF loss
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The amount of a FIF loss is calculated, using the relevant calculation method, under sections EX 44 to EX 61 (which relate to the calculation of FIF income or loss).
Defined in this Act: amount, calculation method, FIF loss,
Compare: 2004 No 35 s DN 7
DN 8 Ring-fencing cap on deduction: branch equivalent method
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Amount of deduction
(1) If a person has a FIF loss that is calculated under the branch equivalent method, the deduction the person is allowed for the loss in an income year is no more than the total of—
(a) any attributed CFC income of the person for the income year from a CFC that is resident in the same country as the FIF for the relevant accounting period of the CFC; and
(b) any FIF income of the person for the income year that is calculated under the branch equivalent method from another FIF resident in the same country.
Income only once
(2) When subsection (1) is applied to a FIF loss, an amount of attributed CFC income or FIF income may be used only to the extent to which the income is not used when applying—
(a) subsection (1) to another FIF loss; or
(b) section DN 4 to an attributed CFC loss.
Relationship with section IQ 3
(3) Any excess not able to be deducted because of subsection (1) is a FIF net loss able to be used under section IQ 3 (Ring-fencing cap on FIF net losses).
Defined in this Act: accounting period, amount, attributed CFC income, attributed CFC loss, branch equivalent method, CFC, deduction, FIF, FIF income, FIF loss, FIF net loss, income year,
Compare: 2004 No 35 s DN 9
Subpart DO—Farming and aquacultural business expenditure
Farming
DO 1 Enhancements to land, except trees
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Deduction
(1) A person is allowed a deduction for expenditure that they incur on the following in carrying on a farming or agricultural business on land in New Zealand:
(a) the destruction of weeds or plants detrimental to the land:
(b) the destruction of animal pests detrimental to the land:
(c) the repair of flood or erosion damage to the land:
(d) the destruction of scrub, stumps, or undergrowth on the land:
(e) the clearing or removing from the land of scrub, stumps, or undergrowth:
(f) the construction on the land of fences for farming or agricultural purposes, including buying wire or wire netting for the purpose of making new or existing fences rabbit-proof:
(g) the regrassing and fertilising of all kinds of pasture, if the expenditure is not incurred in the course of a significant capital activity.
Link with subpart DA
(2) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, general limitation, general permission, New Zealand, significant capital activity,
Compare: 2004 No 35 s DO 1
DO 2 Erosion and shelter plantings
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When this section applies
(1) This section applies when a person carries on a farming or agricultural business on land in New Zealand, whether or not the business is the principal business carried on on the land.
Deduction
(2) The person is allowed a deduction for expenditure that they incur in planting or maintaining trees, whether or not on the land, for the purpose of—
(a) preventing or combating erosion of the land; or
(b) providing shelter to the land.
Link with subpart DA
(3) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, general limitation, general permission, New Zealand,
Compare: 2004 No 35 s DO 2
DO 3 Trees on farms
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When this section applies
(1) This section applies when—
(a) a person carries on, on land in New Zealand, a farming or agricultural business that is the principal business carried on on the land; and
(b) they plant or maintain trees on the land; and
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(c) the trees are not—
(i) trees for which the person is allowed a deduction under section DO 2; or
(ii) trees planted mainly to produce fruit; or
(iii) trees planted under a forestry encouragement agreement under the Forestry Encouragement Act 1962.
Deduction
(2) The person is allowed the following deductions:
(a) in an income year in which the person incurs expenditure on planting trees on the land, they are allowed a deduction of the lesser of $7,500 and the expenditure that they incur; and
(b) in an income year in which the person incurs expenditure on maintaining trees on the land, they are allowed a deduction of the lesser of $7,500 and the expenditure that they incur.
Link with subpart DA
(3) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, general limitation, general permission, income year, New Zealand,
Compare: 2004 No 35 s DO 3
DO 4 Improvements to farm land
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When this section applies
(1) This section applies when—
(a) a person carries on a farming or agricultural business on land in New Zealand; and
(b) an improvement described in schedule 20, part A (Expenditure on farming, horticultural, aquacultural, and forestry improvements) has been made to the land; and
(c) the expenditure on the improvement is not expenditure to which sections DO 5 to DO 7 apply.
Deduction: expenditure: owner of land
(2) A person who owns the land is allowed a deduction for expenditure to which all the following apply:
(a) it is incurred on making the improvement; and
(b) it is incurred by the person or by another person; and
(c) it is not incurred on anything described in any of sections DO 1 to DO 3; and
(d) it is incurred in the 1995–96 income year or in a later income year, not including the income year in which the person disposes of the land, the income year being the income year of the person who owns the land; and
(e) it is incurred in developing the land; and
(f) it is of benefit to the business in the income year in which the person is allowed the deduction.
Deduction: expenditure: non-owner of land
(3) A person who does not own the land is allowed a deduction for expenditure to which all the following apply:
(a) it is incurred on making the improvement; and
(b) it is incurred by the person; and
(c) it is not incurred on anything described in any of sections DO 1 to DO 3; and
(d) it is incurred in the 1995–96 income year or in a later income year, not including the income year in which the person ceases to carry on the business on the land; and
(e) it is incurred in developing the land; and
(f) it is of benefit to the business in the income year in which the person is allowed the deduction.
Amount, and timing, of deduction
(4) The amount of the deduction is calculated using the formula—
schedule 20 percentage × diminished value.
Definition of items in formula
(5) In the formula,—
(a) schedule 20 percentage is the percentage set out opposite the description of the improvement in schedule 20, part A:
(b) diminished value is the diminished value of the improvement.
Amount, and timing, for non-listed horticultural plants
(6) When non-listed horticultural plants described in schedule 20, part A, clause 9 have ceased to exist, or to be used in deriving income, on or after 16 December 1991,—
(a) subsection (4) does not apply; and
(b) the amount of the deduction is the diminished value of the non-listed horticultural plants at the time they ceased to exist or to be used in deriving income; and
(c) the deduction is allocated to the income year in which the non-listed horticultural plants ceased to exist or to be used in deriving income.
Link with subpart DA
(7) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Amendment of schedule 20 by Order in Council
(8) The Governor-General may by Order in Council make regulations amending schedule 20 to vary the categories of improvements and percentages of diminished value of those improvements allowed as a deduction.
Defined in this Act: amount, business, capital limitation, deduction, diminished value, general limitation, general permission, income, income year, New Zealand, non-listed horticultural plant, own,
Compare: 2004 No 35 s DO 4
DO 5 Expenditure on land: planting of listed horticultural plants
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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—
1.2 × 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
DO 6 Expenditure on land: horticultural replacement planting
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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—
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—
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—
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
DO 7 Accounting for expenditure on listed horticultural plants under sections DO 5 and DO 6
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Separate accounting for additional listed horticultural plants if deduction under section DO 6
(1) A person to whom section DO 5 applies must, for an income year and for later income years for which subsection (2) does not apply, account separately under sections DO 5 and DO 6 for listed horticultural plants if—
(a) the person has had a deduction under section DO 6 for 1 or both of the 2 income years preceding the income year; and
(b) the person acquires the listed horticultural plants in the income year; and
(c) the listed horticultural plants benefit the business of the person in the income year; and
(d) the listed horticultural plants are not replacement plants.
Combined accounting for listed horticultural plants if no deduction under section DO 6
(2) Despite subsection (1), a person may account under sections DO 5 and DO 6 for listed horticultural plants as 1 planting for an income year and later income years if the person has had no deduction under section DO 6 for both of the 2 income years preceding the income year.
Defined in this Act: deduction, income year, listed horticultural plant, planting, replacement plant,
Compare: 2004 No 35 s DO 4D
DO 8 Meaning of planting and plot
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In this section and sections DO 5 to DO 7,—
planting for a person and an income year means 1 or more listed horticultural plants—
(a) that are involved in the business of the person during the income year; and
(b) for which the person must account under sections DO 5 and DO 6, for the income year, separately from any other listed horticultural plants that are involved in the business of the person
plot means the land occupied by the listed horticultural plants in a planting.
Defined in this Act: income year, listed horticultural plant, planting,
Compare: 2004 No 35 s DO 4E
DO 9 Meaning of replaced area fraction
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Meaning
(1) In section DO 6, replaced area fraction, for a planting and an income year, means the amount calculated using the formula—
Definition of items in formula
(2) In the formula in subsection (1),—
(a) replacement area is the area, at the end of the income year, of the part of the plot on which listed horticultural plants in the planting are planted or regrafted during the income year as replacement plants:
(b) plot area is the total area, at the end of the income year, of the plot.
Defined in this Act: income year, listed horticultural plant, planting, plot, replacement plant,
Compare: 2004 No 35 s DO 4E
DO 10 Farming or horticulture expenditure of lessor or sublessor
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When this section applies
(1) This section applies when a person—
(a) is the owner of an estate in fee simple or of a leasehold estate in land in New Zealand; and
(b) grants a lease or a sublease of the land to a person who carries on a farming or agricultural business on the land; and
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(c) in the term of the lease or sublease,—
(i) incurs expenditure relating to the land for which they are allowed a deduction under any of section DO 1, DO 2, DO 4, DO 5, or DO 6; or
(ii) is allowed a deduction under section DO 4(2), DO 5(2), or DO 6 for expenditure incurred by another person relating to the land.
Relationship with sections DO 1, DO 2, DO 4, DO 5, and DO 6
(2) Sections DO 1, DO 2, DO 4, DO 5, and DO 6, whichever is applicable to the person, applies as if the person were personally carrying on a farming or agricultural business on the land at the time they incur the expenditure or are allowed the deduction.
Defined in this Act: business, deduction, estate, lease, leasehold estate, New Zealand, own, term of the lease,
Compare: 2004 No 35 s DO 5
DO 11 Improvement destroyed or made useless
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When this section applies
(1) This section applies when, in an income year of a person,—
(a) the person owns land, or operates a business on land, to which an improvement described in schedule 20 (Expenditure on farming, horticultural, aquacultural, and forestry improvements) has been made for the purposes of the business; and
(b) the improvement is destroyed or irreparably damaged and made useless for the purpose of deriving income; and
(c) the person would be entitled for the income year to a deduction under section DO 4 or DO 5 for expenditure on the improvement if the improvement had not been destroyed or irreparably damaged and made useless; and
(d) the damage occurs in an income year that corresponds to the 2005–06 tax year or a later tax year; and
(e) the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person.
Deduction: diminished value of expenditure
(2) The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement.
Link with subpart DA
(3) This section overrides the general permission and the capital limitation. The other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, diminished value, general limitation, general permission, income, income year, tax year,
Compare: 2004 No 35 s DO 5B
Aquaculture
DO 12 Improvements to aquacultural business
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When this section applies
(1) This section applies when—
(a) a person carries on an aquacultural business in New Zealand; and
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(b) the aquacultural business is—
(i) fish farming under a licence issued under the Freshwater Fish Farming Regulations 1983; or
(ii) mussel farming; or
(iii) rock oyster farming; or
(iv) scallop farming; or
(v) sea-cage salmon farming; and
(c) an improvement described in any of schedule 20, parts B to F (Expenditure on farming, horticultural, aquacultural, and forestry improvements) is made for the purposes of the business.
Deduction: expenditure: owner of improvement
(2) A person who owns the improvement is allowed a deduction for expenditure to which all the following apply:
(a) it is incurred on making the improvement; and
(b) it is incurred by the person or by another person; and
(c) it is incurred in the 1995–96 income year or in a later income year, not including the income year in which the person ceases to carry on the business, the income year being the income year of the person who owns the improvement; and
(d) it is incurred in developing the business; and
(e) it is of benefit to the business in the income year in which the person is allowed the deduction.
Deduction: expenditure: non-owner of improvement
(3) A person who does not own the improvement is allowed a deduction for expenditure to which all the following apply:
(a) it is incurred on making the improvement; and
(b) it is incurred by the person; and
(c) it is incurred in the 1995–96 income year or in a later income year, not including the income year in which the person ceases to carry on the business; and
(d) it is incurred in developing the business; and
(e) it is of benefit to the business in the income year in which the person is allowed the deduction.
Amount, and timing, of deduction
(4) The amount of the deduction is calculated using the formula—
schedule 20 percentage × diminished value.
Definition of items in formula
(5) In the formula,—
(a) schedule 20 percentage is the percentage set out opposite the description of the improvement in any of schedule 20, parts B to F:
(b) diminished value is the diminished value of the improvement.
Link with subpart DA
(6) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, diminished value, general limitation, general permission, income year, New Zealand,
Compare: 2004 No 35 s DO 6
DO 13 Improvement destroyed or made useless
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When this section applies
(1) This section applies when, in an income year of a person,—
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(a) the person carries on an aquacultural business in New Zealand—
(i) that meets the requirements of section DO 12(1)(b); and
(ii) for the purposes of which an improvement described in schedule 20 (Expenditure on farming, horticultural, aquacultural, and forestry improvements) has been made; and
(b) the improvement is destroyed or irreparably damaged and made useless for the purpose of deriving income; and
(c) the person would be entitled for the income year to a deduction under section DO 12 for expenditure on the improvement if the improvement had not been destroyed or irreparably damaged and made useless; and
(d) the damage occurs in an income year that corresponds to the 2005–06 tax year or a later tax year; and
(e) the damage is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person.
Deduction: diminished value of expenditure
(2) The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement.
Link with subpart DA
(3) This section overrides the general permission and the capital limitation. The other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, diminished value, general limitation, general permission, income, income year, tax year,
Compare: 2004 No 35 s DO 7
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Subpart DP—Forestry expenditure
DP 1 Expenditure of forestry business
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Deduction
(1) A person carrying on a forestry business on land in New Zealand is allowed a deduction for expenditure that they incur on—
(a) administrative overheads, rates, rent, insurance premiums, or other expenses of the same kinds:
(b) interest on money borrowed for the purposes of the business and employed as capital in the business:
(c) planting or maintaining trees on the land:
(d) applying fertiliser after the planting of the trees:
(e) disease control, pest control, or weed control (excluding releasing):
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(f) repair or maintenance of plant, machinery, or equipment used by the person mainly in—
(i) planting or maintaining trees on the land; or
(ii) preparing or otherwise developing the land for the person’s forestry operations:
(g) repair or maintenance of land improvements, other than trees, effected on the land and used by the person mainly in the business:
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(h) the construction to or on the land of access tracks that are—
(i) constructed for a specific operational purpose; and
(ii) used for no longer than 12 months after construction:
(i) the cost of standing timber that is lost or destroyed.
Timing of deduction
(2) Although timber is revenue account property, a deduction for expenditure described in subsection (1) is not allocated under section EA 2(2) (Other revenue account property) but under section BD 4(2) (Allocation of deductions to particular income years).
Link with subpart DA
(3) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, general limitation, general permission, interest, New Zealand, revenue account property, standing timber, timber,
Compare: 2004 No 35 s DP 1
DP 2 Plant or machinery
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When this section applies: first case
(1) This section applies when—
(a) a person incurs expenditure on acquiring, on or after 1 April 1975, plant or machinery; and
(b) the person first uses the plant or machinery on or after 1 April 1975; and
(c) the person uses the plant or machinery mainly in developing land in New Zealand for use in a forestry business to be carried on by them on the land.
When this section applies: second case
(2) This section also applies when—
(a) a person carrying on a forestry business on land in New Zealand incurs expenditure on acquiring, on or after 1 April 1975, plant or machinery; and
(b) the person first uses the plant or machinery on or after 1 April 1975; and
(c) the person uses the plant or machinery mainly in planting or maintaining trees on the land.
Deduction
(3) The person is allowed a deduction for an amount of depreciation loss for the plant or machinery.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: acquire, amount, business, capital limitation, deduction, depreciation loss, general limitation, general permission, New Zealand,
Compare: 2004 No 35 s DP 2
DP 3 Improvements to forestry land
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When this section applies
(1) This section applies when—
(a) a person carries on a forestry business on land in New Zealand; and
(b) an improvement described in schedule 20, part G (Expenditure on farming, horticultural, aquacultural, and forestry improvements) has been made to the land.
Deduction: expenditure: owner of land
(2) A person who owns the land is allowed a deduction for expenditure to which all the following apply:
(a) it is incurred on making the improvement; and
(b) it is incurred by the person or by another person; and
(c) it is incurred in the 1995–96 income year or in a later income year, not including the income year in which the person disposes of the land, the income year being the income year of the person who owns the land; and
(d) it is incurred in developing the land; and
(e) it is of benefit to the business in the income year in which the person is allowed the deduction.
Deduction: expenditure: non-owner of land
(3) A person who does not own the land is allowed a deduction for expenditure to which all the following apply:
(a) it is incurred on making the improvement; and
(b) it is incurred by the person; and
(c) it is incurred in the 1995–96 income year or in a later income year, not including the income year in which the person ceases to carry on the business on the land; and
(d) it is incurred in developing the land; and
(e) it is of benefit to the business in the income year in which the person is allowed the deduction.
Amount, and timing, of deduction
(4) The amount of the deduction is calculated using the formula—
schedule 20 percentage × diminished value.
Definition of items in formula
(5) In the formula,—
(a) schedule 20 percentage is the percentage set out opposite the description of the improvement in schedule 20, part G:
(b) diminished value is the diminished value of the improvement.
Link with subpart DA
(6) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, diminished value, general limitation, general permission, income year, New Zealand, own,
Compare: 2004 No 35 s DP 3
DP 4 Improvement destroyed or made useless
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When this section applies
(1) This section applies when, in an income year of a person,—
(a) the person operates a forestry business on land, to which there has been made an improvement; and
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(b) the improvement is destroyed or irreparably damaged and made useless for the purpose of deriving income—
(i) in an income year that corresponds to the 2005–06 tax year or a later tax year; and
(ii) other than as a result of the action or failure to act of the person, an agent of the person, or an associated person; and
(c) the person would be entitled for the income year to a deduction under section DP 3 for expenditure on the improvement if the improvement had not been destroyed or made useless.
Deduction: diminished value of expenditure
(2) The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement.
Link with subpart DA
(3) This section overrides the general permission and the capital limitation. The other general limitations still apply.
Defined in this Act: business, capital limitation, deduction, diminished value, general limitation, general permission, income, income year, tax year,
Compare: 2004 No 35 s DP 3B
DP 5 Forestry encouragement agreement: deductions
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When this section applies
(1) This section applies when a person makes a forestry encouragement agreement under the Forestry Encouragement Act 1962.
Deduction: forestry expenditure under agreement
(2) The person is allowed a deduction for expenditure that they incur if all the following apply to the expenditure:
(a) it is expenditure incurred in planting or maintaining trees under the agreement; and
(b) it is not expenditure for which an advance has been or is to be made under the agreement; and
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(c) it is not expenditure represented in a payment made to the person under the Forestry Encouragement Grants Regulations 1983 and incurred in—
(i) planting or maintaining trees; or
(ii) meeting administrative overheads, rates, rent, insurance premiums, or other expenses of the same kinds; or
(iii) paying interest on money borrowed for the purpose of developing the trees and employed as capital in developing the trees.
Deduction: advance
(3) The person is allowed a deduction for expenditure that they incur in—
(a) making a payment of interest for an advance made under the agreement:
(b) making a payment reducing the principal of an advance made under the agreement.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, interest, pay,
Compare: 2004 No 35 s DP 4
DP 6 Forestry encouragement agreement: no deduction
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No deduction
(1) A person who has made a forestry encouragement agreement under the Forestry Encouragement Act 1962 is denied a deduction for an amount equal to the amount from which they are relieved in the following circumstances:
(a) an advance is made to the person under the agreement; and
(b) the advance is exempt income of the person under section CW 2 (Forestry encouragement agreements); and
(c) the person is later relieved from some or all of their liability to repay the principal.
Link with subpart DA
(2) This section overrides the general permission.
Defined in this Act: amount, deduction, exempt income, general permission, pay,
Compare: 2004 No 35 s DP 5
DP 7 Land contouring: no deduction
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No deduction
(1) A person who derives income under section CB 24 (Disposal of timber or right to take timber) or CB 25 (Disposal of land with standing timber) is denied a deduction for expenditure that they incur on land contouring in the course of deriving the income.
Link with subpart DA
(2) This section overrides the general permission.
Defined in this Act: deduction, general permission, income,
Compare: 2004 No 35 s DP 6
DP 8 Forestry business on land bought from the Crown, Maori owners, or holding company: no deduction
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No deduction: forestry company
(1) A forestry company is denied a deduction for interest to which both the following apply:
(a) it is paid by the company under a qualifying debenture issued by the company; and
(b) it is exempt income of the person deriving it, under section CW 3 (Forestry companies and Maori investment companies).
No deduction: Maori investment company
(2) A Maori investment company is denied a deduction for interest to which both the following apply:
(a) it is paid by the company under a qualifying debenture issued by the company; and
(b) it is exempt income of the person deriving it, under section CW 3.
Relationship with section FA 2
(3) Section FA 2 (Recharacterisation of certain debentures) as it applies to substituting debentures, does not apply to a qualifying debenture.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: business, deduction, exempt income, forestry company, general permission, holding company, interest, Maori investment company, Maori owners, pay, qualifying debenture, substituting debenture,
Compare: 2004 No 35 s DP 7
DP 9 Cost of acquiring timber: forestry business on land bought from the Crown, Maori owners, or holding company
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When this section applies
(1) This section applies when a forestry company buys land with standing timber on it from a seller who is the Crown, the Maori owners, or a holding company of the forestry company.
Sellers of Maori land
(2) For the purposes of subsection (1),—
(a) land sold to the forestry company by the Maori Trustee or by a trustee for a Maori owner is treated as if it had been sold by the beneficial owners:
(b) land sold to the forestry company by a Maori incorporation is treated as if it had been sold by the members of the incorporation.
Cost of acquiring timber
(3) The cost to the forestry company of acquiring the timber is the lesser of—
(a) the cost of the timber to the seller at the date of the sale; and
(b) the amount described in section CB 25(3) (Disposal of land with standing timber).
Defined in this Act: business, forestry company, holding company, Maori incorporation, Maori owners, standing timber, trustee,
Compare: 2004 No 35 s DP 8
DP 10 Cost of acquiring timber or right to take timber: other cases
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Acquiring land with standing timber
(1) For a person acquiring land with standing timber on it in a disposal to which section CB 25 (Disposal of land with standing timber) applies, the cost of acquiring the timber is the amount that is, under CB 25, income of the person disposing of the land.
Recharacterisation or avoidance
(2) For a person acquiring timber or a right to take timber in a disposal or distribution to which section EB 24, FB 6, FB 7, GC 1, or GC 2 (which relate to the disposal of trading stock) applies, the cost of acquiring the timber or the cost of acquiring a right to take timber is the amount treated as—
(a) the price paid or realised under section EB 24 (Apportionment on disposal of business assets that include trading stock); or
(b) the consideration under sections FB 6 and FB 7 (which relate to the disposal of timber under a relationship agreement); or
(c) the price realised under section GC 1 (Disposals of trading stock at below market value); or
(d) the price realised under section GC 2 (Disposals of timber rights or standing timber).
Transfers between associated persons
(3) Subsections (4) and (5) apply if—
(a) a person (the transferor) disposes of timber, a right to take timber, or standing timber, to an associated person (the transferee); and
(b) as a result, the transferor has an amount of income under section CB 24 or CB 25 (which relate to income from timber).
Limit on deduction for transferor
(4) The deduction that the transferor is allowed for the cost of the timber, right to take timber, or standing timber must not be more than the amount of the income.
Transferee’s deduction
(5) The deduction that the transferee is allowed for the cost of acquiring the timber is calculated on the basis that the transferee acquired the timber of the total of—
(a) the cost to the transferee of acquiring the timber; and
(b) the amount, if any, for which the transferor is denied a deduction under subsection (4).
Defined in this Act: amount, associated person, dispose, income, pay, right to take timber, standing timber, timber,
Compare: 2004 No 35 ss DP 9, GD 15
DP 11 Cost of timber
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When this section applies
(1) This section applies when—
(a) an amount of cost of some timber is treated by a person under generally accepted accounting practice as a cost of the timber for the person and reported accordingly for financial reporting purposes; and
(b) in the absence of section DB 46 (Avoiding, remedying, or mitigating effects of discharge of contaminant), no other provision of this Act would allow the person a deduction for the amount; and
(c) an amount derived by the person from disposing of the timber would be income of the person under section CB 24 (Disposal of timber or right to take timber) or CB 25 (Disposal of land with standing timber).
Deduction
(2) The person is allowed a deduction for the amount.
Timing of deduction: trading stock
(3) If the amount is a cost of trading stock, the deduction is allocated to the income year in which the timber first becomes trading stock of the person.
Timing of deduction: not trading stock
(4) If the amount is not a cost of trading stock, the deduction is allocated by section EA 2 (Other revenue account property).
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, cost of timber, deduction, dispose, general limitation, general permission, generally accepted accounting practice, income, income year, supplement, timber, trading stock,
Compare: 2004 No 35 ss DP 10, GD 15
Subpart DQ—Income equalisation schemes and environmental restoration accounts schemes
DQ 1 Main income equalisation scheme
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Deduction
(1) A person who has made a deposit for a tax year is allowed a deduction of the amount quantified in section EH 7(2) (Deduction of deposit).
Timing of deduction
(2) The deduction is allocated to the income year corresponding to the tax year described in section EH 7(3).
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, deposit, general limitation, general permission, income year, main income equalisation scheme, person, supplement, tax year,
Compare: 2004 No 35 s DQ 1
DQ 2 Adverse event income equalisation scheme
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Deduction
(1) A person who has made a deposit for a tax year is allowed a deduction of the amount quantified in section EH 41(2) (Deduction of deposit).
Timing of deduction
(2) The deduction is allocated to the income year corresponding to the tax year described in section EH 41(3).
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: adverse event income equalisation scheme, amount, capital limitation, deduction, deposit, general limitation, general permission, income year, person, supplement, tax year,
Compare: 2004 No 35 s DQ 2
DQ 3 Thinning operations income equalisation scheme
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Deduction
(1) A person who has made a deposit for a tax year is allowed a deduction of the amount quantified in section EH 67(2) (Deduction of deposit).
Timing of deduction
(2) The deduction is allocated to the income year corresponding to the tax year described in section EH 67(3).
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, deposit, general limitation, general permission, income year, person, supplement, tax year, thinning operations income equalisation scheme,
Compare: 2004 No 35 s DQ 3
DQ 4 Environmental restoration accounts scheme
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Deduction for payment
(1) A person is allowed a deduction of the amount set out in section EK 7 (Deduction for payment) if the person has made a payment for an income year to the Commissioner under section EK 2 (Persons who may make payment to environmental restoration account) and the amount is not refunded under section EK 9 (Refund of payment if excess, lacking details).
Timing of deduction
(2) The deduction under subsection (1) is allocated to the income year referred to in section EK 7.
Deduction for transfer
(3) A person is allowed a deduction for an income year of the amount set out in section EK 8 (Deduction for transfer) if in an income year the person receives—
(a) a transfer under section EK 15 (Transfer on request) that is treated under section EK 15(3) as being a payment by the person:
(b) a transfer under section EK 16(3)(b) (Transfer on death, bankruptcy, or liquidation):
(c) a transfer under section EK 19 (Environmental restoration account of amalgamating company).
Timing of deduction
(4) A deduction under subsection (3) is allocated to the income year referred to in section EK 8.
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income year, pay, supplement,
Compare: 2004 No 35 s DQ 4
Subpart DR—Life insurance business expenditure
DR 1 Mortality profit formula: negative result
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When this section applies
(1) This section applies when—
(a) a life insurer follows the steps in section EY 26(2) (Mortality profit: when life insurers providing life insurance at start of income year) or EY 27(2) (Mortality profit: when life insurers not providing life insurance at start of income year) for an income year and gets a negative result; and
(b) the negative result is not treated as zero because 1 of the exceptions in section EY 33(2) to (4) (Mortality profit formula: individual result may be negative only in some cases) applies.
Deduction
(2) The life insurer is allowed a deduction of the amount quantified in section EY 34(2) (Mortality profit formula: negative result).
Timing of deduction
(3) The deduction is allocated to the income year described in section EY 34(3).
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income year, life insurer, mortality profit formula, supplement,
Compare: 2004 No 35 s DR 1
DR 2 Disposal of property
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When this section applies
(1) This section applies when a life insurer disposes of any property of their life insurance business.
Exclusions
(2) This section does not apply when the property is—
(a) a share to which section DB 24 (Share losses) applies; or
(b) a financial arrangement; or
(c) property for whose cost the life insurer has already been allowed a deduction, other than for an amount of depreciation loss.
Deduction
(3) The life insurer is allowed a deduction of the amount quantified in section EY 47(2) (Deductions for disposal of property).
Timing of deduction
(4) The deduction is allocated to the income year described in section EY 47(3).
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, depreciation loss, financial arrangement, general limitation, general permission, income year, life insurance, life insurer, property, share, supplement,
Compare: 2004 No 35 s DR 2
DR 3 Specific deductions denied to life insurers and fully reinsured persons
-
No deduction
(1) A life insurer is denied a deduction for—
(a) a claim payable by the life insurer under a life insurance policy; or
(b) expenditure or loss incurred by the life insurer in deriving policyholder income; or
(c) a bonus or other discretionary amount added to the actuarial reserves; or
(d) a premium payable by the life insurer under a life reinsurance policy.
Inclusion
(2) This section applies to a person who is carrying on a business of providing life insurance but who is treated as not carrying on a business of providing life insurance because they have full reinsurance.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: actuarial reserves, amount, business, claim, deduction, full reinsurance, general permission, life insurance, life insurance policy, life insurer, life reinsurance policy, loss, pay, policyholder income, premium,
Compare: 2004 No 35 s DR 3
Subpart DS—Film industry expenditure
DS 1 Acquiring film rights
-
Deduction
(1) A person is allowed a deduction for expenditure that they incur in acquiring a film right, if the film is completed, whether it is completed before, at the time, or after the film right is acquired.
Exclusion
(2) This section does not apply to expenditure that a person incurs in acquiring a film right if—
(a) the person operates a television station, a television network, or a cable television system, and the film right is acquired mainly to enable the film to be broadcast in New Zealand; or
(b) the film is intended to be shown as an advertisement; or
(c) the expenditure is film production expenditure.
Timing of deduction
(3) The deduction is allocated under section EJ 4 (Expenditure incurred in acquiring film rights in feature films) or EJ 5 (Expenditure incurred in acquiring film rights in films other than feature films).
No other deduction
(4) No other deduction for expenditure incurred in acquiring a film right is allowed under any other provision of this Act.
Avoidance arrangements
(5) The amount of the deduction may be reduced under—
(a) section GB 17 (Excessive amounts for film rights or production expenditure):
(b) section GB 18 (Arrangements to acquire film rights or incur production expenditure).
Link with subpart DA
(6) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: arrangement, capital limitation, completed, deduction, film, film production expenditure, film right, general limitation, general permission, New Zealand,
Compare: 2004 No 35 s DS 1
DS 2 Film production expenditure
-
Deduction
(1) A person is allowed a deduction for film production expenditure if—
(a) the film is completed; and
-
(b) the person has a film right in it—
(i) before it is completed:
(ii) at the time it is completed:
(iii) after it is completed.
Inclusions
(2) For the purposes of subsection (1),—
(a) if a person (person A) reimburses another person (person B) for film production expenditure that person B incurs, and does it before the film is completed, the reimbursement is treated as film production expenditure incurred by person A; and
(b) if a person (person A) reimburses another person (person B) for expenditure on interest incurred by person B in producing the film, person A may treat the reimbursement as film production expenditure incurred by person A.
Exclusion
(3) This section does not apply to film production expenditure if—
(a) the film is produced mainly for broadcast in New Zealand by a person who operates a television station, a television network, or a cable television system; or
(b) the film is intended to be shown as an advertisement; or
(c) the film is one for which a large budget screen production grant is made.
Timing of deduction
(4) The deduction is allocated under section EJ 7 (Film production expenditure for New Zealand films) or EJ 8 (Film production expenditure for films other than New Zealand films).
No other deduction
(5) No other deduction for film production expenditure is allowed under any other provision of this Act.
Avoidance arrangements
(6) The amount of the deduction may be reduced or the timing of the deduction may be delayed under—
(a) section GB 17 (Excessive amounts for film rights or production expenditure):
(b) section GB 18 (Arrangements to acquire film rights or incur production expenditure):
(c) section GB 19 (When film production expenditure payments delayed or contingent).
Link with subpart DA
(7) The link between this section and subpart DA (General rules) is as follows:
(a) it overrides the capital limitation; and
(b) the other general limitations still apply; and
-
(c) either—
(i) the general permission must be satisfied; or
(ii) a provision that supplements the general permission must be satisfied.
Defined in this Act: arrangement, capital limitation, completed, deduction, film, film production expenditure, film right, general limitation, general permission, large budget screen production grant, New Zealand, pay, supplement,
Compare: 2004 No 35 s DS 2
DS 3 Clawback of deductions for film reimbursement schemes
-
Reduction of deductions
(1) A person who disposes of property under a film reimbursement scheme must use the formula in subsection (3) to reduce—
(a) the total deductions that they have been allowed for the disposal under the scheme under section DS 1 or DS 2; or
(b) the total deductions that they would be allowed for the disposal under the scheme under section DS 1 or DS 2 in the absence of this section.
Order of reduction
(2) Deductions must be reduced in the same order as they have been allowed or would be allowed.
Formula
(3) The total deductions must be reduced to an amount equal to the greater of zero and the amount calculated using the formula—
total deductions − total consideration.
Definition of items in formula
(4) In the formula,—
-
(a) total deductions is the total amount of deductions that—
(i) the person has been allowed under section DS 1 or DS 2; or
(ii) the person would be allowed under section DS 1 or DS 2 in the absence of this section:
(b) total consideration is the total amount of consideration for the disposal of the property that the person derives and that is not film income.
Application of Tax Administration Act 1994
(5) Section 44A of the Tax Administration Act 1994 applies to a person to whom this section applies.
Amendment of assessment
(6) Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to this section.
Exclusion
(7) This section does not apply to a deduction for expenditure excluded under section DZ 11 (Film reimbursement scheme on or before 30 June 2001).
Defined in this Act: amount, assessment, Commissioner, deduction, film income, film reimbursement scheme, time bar,
Compare: 2004 No 35 s DS 3
DS 4 Meaning of film reimbursement scheme
-
Meaning
(1)
Film reimbursement scheme means an arrangement to which subsections (2) to (4) apply.
Deduction allowed
(2) The first requirement for a film reimbursement scheme is that it is a scheme under which a person may incur expenditure for which they are allowed a deduction under—
(a) section DS 1 or DS 2, or would be allowed a deduction in the absence of section DS 3:
-
(b) subpart DA (General rules), if the expenditure is for—
(i) a film right:
(ii) a right to an amount that is dependent on or calculated by reference to income from the rental, sale, use, or other exploitation of a film.
Disposal of property
(3) The second requirement for a film reimbursement scheme is that 1 of the following applies:
(a) it enables the person or an associated person to dispose of property; or
(b) it gives a right to the person or an associated person to dispose of property; or
(c) it gives a right, the right creates an obligation for the person or an associated person, and the person or the associated person may meet the obligation by disposing of property.
Consideration not film income
(4) The third requirement for a film reimbursement scheme is that it is a scheme under which some or all of the consideration for the property would not be film income.
Associated persons
(5) For the purposes of subsection (3), a shareholder in a loss-attributing qualifying company and the company are associated persons, in addition to the associated persons described in subpart YB (Associated persons and nominees).
Defined in this Act: amount, arrangement, associated person, deduction, film income, film reimbursement scheme, film right, income, loss-attributing qualifying company, shareholder,
Compare: 2004 No 35 s DS 4
Subpart DT—Petroleum mining expenditure
Petroleum exploration expenditure
DT 1 Petroleum exploration expenditure
-
Deduction
(1) A person is allowed a deduction for petroleum exploration expenditure incurred by them.
Relationship with section DT 2
(2) This section is overridden by section DT 2.
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, petroleum exploration expenditure, supplement,
Compare: 2004 No 35 s DT 1
DT 2 Arrangement for petroleum exploration expenditure and sale of property
-
What this section applies to
(1) This section applies to a person and an arrangement if—
(a) the person may incur expenditure under the arrangement and would be allowed a deduction for the expenditure under section DT 1; and
-
(b) the person or a person associated with them may dispose of property—
(i) under the arrangement; or
(ii) under a right given by the arrangement to the person or the associated person; or
(iii) in meeting an obligation of the person or the associated person arising from a right given by the arrangement; and
-
(c) the property is not—
(i) exploratory material; or
(ii) a prospecting permit for petroleum; or
(iii) an exploration permit for petroleum.
Amount of deduction
(2) The person is allowed a deduction in an income year for the expenditure described in subsection (1)(a) but only to the extent of an amount equal to the greater of zero and the amount calculated using the formula—
expenditure − (consideration − lesser amount).
Exclusion
(3) If consideration for the property is derived in an income year, the person’s deductions in earlier income years for the expenditure described in subsection (1)(a) are reduced so that the total of those deductions is equal to the greater of zero and the amount calculated using the formula—
previous expenditure − consideration.
Definition of items in formulas
(4) In the formulas in subsections (2) and (3),—
(a) expenditure is the amount of expenditure for which the person would be allowed a deduction in the income year under section DT 1(1):
(b) consideration is the total consideration for the property that is derived before or during the income year:
-
(c) lesser amount is the lesser of—
(i) the amount of consideration; and
(ii) the amount of expenditure for which a person would be allowed a deduction in earlier income years under section DT 1(1):
(d) previous expenditure is the amount of expenditure for which a person would be allowed a deduction in earlier income years under section DT 1(1).
Order of reduction
(5) When an adjustment under subsection (3) is being made, deductions are treated as denied in the same order in time as they would have been allowed under section DT 1(1).
Application of Tax Administration Act 1994
(6) Section 44A of the Tax Administration Act 1994 applies to a person to whom this section applies.
Amendment of assessment
(7) Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to this section.
Relationship with section DT 1
(8) This section overrides section DT 1.
Link with subpart DA
(9) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, arrangement, assessment, associated person, Commissioner, consideration, deduction, dispose, exploration permit, exploratory material, income year, petroleum, petroleum exploration expenditure, prospecting permit, supplement, time bar,
Compare: 2004 No 35 s DT 2
DT 3 Acquisition of privileges and permits
-
The consideration that a person pays to acquire an existing privilege, a prospecting permit for petroleum, or an exploration permit for petroleum from a petroleum miner is treated as petroleum exploration expenditure incurred in the income year in which the petroleum miner disposes of the privilege or permit to the person.
Defined in this Act: consideration, dispose, existing privilege, exploration permit, income year, pay, petroleum exploration expenditure, petroleum miner, prospecting permit,
Compare: 2004 No 35 s DT 3
DT 4 Acquisition of exploratory material
-
The consideration that a person pays to acquire exploratory material from a petroleum miner is treated as petroleum exploration expenditure incurred in the income year in which the petroleum miner disposes of the material to the person.
Defined in this Act: consideration, dispose, exploratory material, income year, pay, petroleum exploration expenditure, petroleum miner,
Compare: 2004 No 35 s DT 4
Petroleum development expenditure
DT 5 Petroleum development expenditure
-
Deduction
(1) A petroleum miner is allowed a deduction for petroleum development expenditure incurred by them.
Timing of deduction
(2) The deduction is allocated under section EJ 12 (Petroleum development expenditure).
Relationship with section DZ 3
(3) This section is overridden by section DZ 3 (Petroleum mining: development expenditure from 1 October 1990 to 15 December 1991).
Link with subpart DA
(4) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, petroleum development expenditure, petroleum miner, supplement,
Compare: 2004 No 35 s DT 5
DT 6 Expenditure on petroleum mining assets
-
Expenditure that a person incurs in buying a petroleum mining asset is treated as petroleum development expenditure if, at the time the asset is bought,—
(a) petroleum is produced in commercial quantities on a continuing basis under a petroleum permit that is the one being bought; or
(b) petroleum is produced in commercial quantities on a continuing basis under a petroleum permit that applies to the permit area in which an asset of the kind described in section CT 7(1)(b) or (c) (Meaning of petroleum mining asset) is to be used; or
(c) an application for a petroleum mining permit for the permit area has been made by a person entitled under section 32(3) of the Crown Minerals Act 1991.
Defined in this Act: permit area, petroleum, petroleum development expenditure, petroleum mining asset, petroleum permit,
Compare: 2004 No 35 s DT 6
DT 7 Exploratory well expenditure
-
When this section applies
(1) This section applies when—
(a) a petroleum miner incurs exploratory well expenditure; and
(b) the miner then uses the exploratory well for the commercial production of petroleum; and
(c) the exploratory well expenditure is then treated, under section CT 3 (Exploratory well used for commercial production), as income of the miner.
Treatment of expenditure
(2) An amount equal to the amount that is treated as income is treated as petroleum development expenditure incurred by the petroleum miner in the income year in which commercial production from the well starts.
Defined in this Act: amount, commercial production, exploratory well expenditure, income, income year, petroleum, petroleum development expenditure, petroleum miner,
Compare: 2004 No 35 s DT 7
DT 8 Acquisition of certain petroleum mining assets
-
The consideration that a person pays to acquire a petroleum mining asset, other than an existing privilege, a prospecting permit for petroleum, or an exploration permit for petroleum, from a petroleum miner is treated as petroleum development expenditure incurred in the income year in which the petroleum miner disposes of the petroleum mining asset to the person.
Defined in this Act: consideration, dispose, existing privilege, exploration permit, income year, pay, petroleum, petroleum development expenditure, petroleum miner, petroleum mining asset, prospecting permit,
Compare: 2004 No 35 s DT 8
DT 9 Disposal of petroleum mining asset to associate
-
When this section applies
(1) This section applies when—
-
(a) a petroleum miner disposes of a petroleum mining asset to—
(i) a person associated with the miner; or
(ii) a person who holds the asset for the miner; or
(iii) a person who holds the asset for a person associated with the miner; and
(b) section EJ 16(2) (Disposal of petroleum mining asset to associate) prevents the miner from taking the full amount of a deduction allocated under section EJ 12 (Petroleum development expenditure) to the income year in which the miner disposes of the asset.
No deduction
(2) The miner is denied a deduction for—
(a) the amount that section EJ 16(2) prevents the miner from taking; and
(b) the amount of the deduction allocated under section EJ 12 to income years after the income year in which the miner disposes of the asset.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: amount, associated person, deduction, dispose, general permission, income year, petroleum miner, petroleum mining asset,
Compare: 2004 No 35 s DT 9
-
DT 10 Disposal of petroleum mining asset outside association
-
When this section applies
(1) This section applies when—
(a) a petroleum miner disposes of a petroleum mining asset to a person described in subsection (2) (person A); and
(b) person A disposes of the asset to a person described in subsection (3) (person B).
Person A
(2) For the purposes of subsection (1)(a), the persons are—
(a) an associated person of the miner; or
(b) a person who holds the asset for the miner; or
(c) a person who holds the asset for an associated person of the miner.
Person B
(3) For the purposes of subsection (1)(b), the persons are—
(a) a person not associated with the miner; or
(b) a person who does not hold the asset for the miner; or
(c) a person who does not hold the asset for a person associated with the miner.
Deduction
(4) Person A is allowed a deduction.
Amount of deduction
(5) The amount of the deduction is the amount for which the petroleum miner is denied a deduction under section DT 9.
Timing of deduction
(6) The deduction is allocated to the income year in which person A disposes of the asset.
Link with subpart DA
(7) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, associated person, capital limitation, deduction, dispose, general limitation, general permission, income year, petroleum miner, petroleum mining asset, supplement,
Compare: 2004 No 35 s DT 10
DT 11 Association ending
-
When this section applies
(1) This section applies when—
-
(a) a petroleum miner disposes of a petroleum mining asset to a person (person A) who is—
(i) an associated person of the miner; or
(ii) a person who holds the asset for an associated person of the miner; or
(iii) a person who holds the asset for the miner; and
-
(b) while person A holds the asset,—
(i) the association between the miner and the associated person ends; or
(ii) the association between the miner and the person who holds the asset for the miner ends.
Exclusion
(2) This section does not apply when the petroleum miner and the other party to the association end their association—
(a) for the purpose of the miner being allowed a deduction under this section; or
(b) for various purposes, 1 of which is, as a more than merely incidental purpose, the miner being allowed a deduction under this section.
Deduction
(3) The petroleum miner is allowed a deduction.
Amount of deduction
(4) The amount of the deduction is the amount for which the petroleum miner is denied a deduction under section DT 9.
Timing of deduction
(5) The deduction is allocated to the income year in which the association ends.
Link with subpart DA
(6) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, associated person, capital limitation, deduction, dispose, general limitation, general permission, income year, petroleum miner, petroleum mining asset, supplement,
Compare: 2004 No 35 s DT 11
-
Other expenditure
DT 12 Damage to assets
-
Deduction
(1) A petroleum miner is allowed a deduction for the cost of repairing a damaged asset of the kind described in section CT 7(1)(b) or (c) (Meaning of petroleum mining asset).
Link with subpart DA
(2) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, petroleum miner, supplement,
Compare: 2004 No 35 s DT 12
DT 13 Disposal of ownership interests in controlled petroleum mining entities
-
No deduction
(1) A person who disposes of shares or trust interests in a controlled petroleum mining entity is denied a deduction for their cost.
Application of Tax Administration Act 1994
(2) Section 65 of the Tax Administration Act 1994 applies when this section applies.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: controlled petroleum mining entity, deduction, dispose, share,
Compare: 2004 No 35 s DT 13
DT 14 Farm-out arrangements
-
When this section applies
(1) This section applies when a farm-in party under a farm-out arrangement incurs farm-in expenditure that, if it were incurred by the farm-out party, would be petroleum development expenditure, exploratory well expenditure, or prospecting expenditure.
Treatment of farm-in expenditure
(2) The farm-in expenditure is treated as if it were petroleum development expenditure, exploratory well expenditure, or prospecting expenditure, as applicable.
Deduction
(3) The farm-in party is allowed a deduction for the farm-in expenditure that is incurred under the farm-out arrangement on or after 16 December 1991.
Relationship with section DZ 5
(4) Farm-in expenditure that is incurred before 16 December 1991 is dealt with in section DZ 5 (Farm-out arrangements for petroleum mining before 16 December 1991).
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, exploratory well expenditure, farm-in expenditure, farm-in party, farm-out arrangement, general limitation, general permission, petroleum development expenditure, prospecting expenditure, supplement,
Compare: 2004 No 35 s DT 14
DT 15 Persons associated with petroleum miner
-
When this section applies
(1) This section applies to a person associated with a petroleum miner when—
(a) the petroleum miner has some or all of an existing privilege; and
-
(b) the associated person—
(i) undertakes petroleum mining operations in the licence area of the existing privilege; and
(ii) does so under an arrangement for reward; and
(iii) when doing so is not a petroleum miner in relation to the petroleum mining operations.
Deduction
(2) The associated person is allowed a deduction for expenditure or loss that they incur in the petroleum mining operations described in subsection (1).
Amount of deduction
(3) The amount of the deduction is limited to the extent of the amount of income that they derive from the petroleum mining operations.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: amount, arrangement, associated person, deduction, existing privilege, general permission, income, petroleum miner, petroleum mining operations,
Compare: 2004 No 35 s DT 15
DT 16 Removal or restoration operations
-
Deduction
(1) A petroleum miner is allowed a deduction for expenditure that they incur on removal or restoration operations.
Timing of deduction
(2) The deduction is allocated to the income year in which the expenditure is incurred.
Relationship with section EA 2
(3) This section overrides section EA 2 (Other revenue account property).
Link with subpart DA
(4) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income year, petroleum miner, removal or restoration operations, supplement,
Compare: 2004 No 35 s DT 16
General provisions
DT 17 Attribution of expenditure
-
Petroleum mining permit
(1) A deduction for expenditure incurred to acquire a petroleum permit is attributable to the permit area of the petroleum permit.
Other assets
(2) A deduction for expenditure incurred to acquire an asset of the kind described in section CT 7(1)(b) or (c) (Meaning of petroleum mining asset) is attributable to—
(a) the asset; and
(b) the permit area to which the asset relates.
Relationship with this subpart and sections GB 20 and IS 5
(3) This section applies for the purposes of this subpart, sections GB 20 (Arrangements involving petroleum mining) and IS 5 (Petroleum miners’ tax losses), and section 91 of the Tax Administration Act 1994.
Defined in this Act: permit area, petroleum permit,
Compare: 2004 No 35 s DT 17
DT 18 Replacement permits
-
In this subpart, a reference to a petroleum permit includes a reference to a replacement permit. All expenditure incurred, deductions allowed, and petroleum mining assets that are attributable to the petroleum permit are attributable to the replacement permit.
Defined in this Act: deduction, petroleum mining asset, petroleum permit, replacement permit,
Compare: 2004 No 35 s DT 18
DT 19 Partnership interests and disposal of part of asset
-
In this subpart, unless the context requires otherwise,—
(a) a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their interest in the income of the partnership:
(b) references to the disposal of an asset apply equally to the disposal of part of an asset.
Defined in this Act: dispose, income, petroleum permit,
Compare: 2004 No 35 s DT 19
DT 20 Petroleum mining operations outside New Zealand
-
This subpart applies, with any necessary modifications, to a petroleum miner undertaking petroleum mining operations that are—
(a) outside New Zealand and undertaken through a branch or a controlled foreign company; and
(b) substantially the same as the petroleum mining activities governed by this subpart.
Defined in this Act: controlled foreign company, New Zealand, petroleum miner, petroleum mining operations,
Compare: 2004 No 35 s DT 20
Subpart DU—Mineral mining expenditure
DU 1 Mining exploration expenditure and mining development expenditure
-
Deduction
(1) A mining company is allowed a deduction for mining exploration expenditure and mining development expenditure that it incurs.
Amount of deduction
(2) The amount of the deduction is the amount determined under section DU 2.
Mining expenditure
(3) The amount of the expenditure for which the company is allowed a deduction must be taken into account in the mining expenditure item of the formula in section DU 7(5).
Link with subpart DA
(4) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, general limitation, general permission, mining company, mining development expenditure, mining exploration expenditure, supplement,
Compare: 2004 No 35 s DU 1
DU 2 Mining exploration expenditure or mining development expenditure on acquisition of asset
-
What this section does
(1) This section applies when a mining company acquires an asset by incurring mining exploration expenditure or mining development expenditure. It describes the consideration that the mining company is treated as giving for the asset and the consideration that the person who disposes of the asset to the mining company is treated as receiving for it.
Consideration in various cases
(2) The consideration is,—
(a) in a case other than one described in any of subsections (3) to (6), the consideration that the company incurs for the acquisition of the asset:
(b) in the case described in subsection (3), the consideration specified in the subsection for the acquisition of the asset:
(c) in the case described in subsection (4), the consideration specified in the subsection for the acquisition of the asset:
(d) in the case described in subsection (5), the consideration specified in subsection (6) for the acquisition of the asset.
Consideration other than in cash
(3) If some or all of the consideration for the acquisition is other than in cash, and the acquisition is not from an associated person, the consideration that is not in cash has the value agreed between the mining company and the person from whom the asset is acquired. If the mining company and the person do not agree, or if the Commissioner considers that the value agreed is unreasonable, the consideration that is not in cash has the value that the Commissioner decides.
Acquisition from associated person
(4) If the acquisition is from an associated person, the consideration for the acquisition is the market value that the asset has on the date of the acquisition.
Amount specified by parties to acquisition
(5) Subsection (6) applies when—
(a) the mining company acquires the asset for use in carrying on their mining operations or associated mining operations; and
(b) the mining company and the person from whom the asset is acquired give notice to the Commissioner that they have agreed to apply subsection (6); and
-
(c) the notice is given to the Commissioner within 1 of the following times:
(i) the time in which the mining company is required to file a return of income for the income year in which it acquires the asset; or
(ii) a longer time allowed by the Commissioner; and
-
(d) the notice specifies an amount that—
(i) is no more than the market value that the asset has at the date of the acquisition; and
(ii) is no less than the amount of any part of the consideration that is in cash.
Amount specified in notice
(6) The consideration for the acquisition is the amount that the mining company and the person specify in the notice.
Defined in this Act: amount, associated mining operations, associated person, Commissioner, income year, mining company, mining development expenditure, mining exploration expenditure, mining operations, notice, return of income,
Compare: 2004 No 35 s DU 2
DU 3 Replacing or repairing asset
-
When subsections (2) to (4) apply
(1) Subsections (2) to (4) apply when—
(a) a mining company complies with section CU 6(2) (Compensation and scrap payment: use to replace or repair asset); and
(b) the company incurs expenditure in replacing or repairing the asset; and
-
(c) the company has an excess amount because the expenditure is more than the total of—
(i) the amount of insurance, indemnity, or compensation paid; and
(ii) the amount, if any, payable to the company for the disposal of any scrap of the asset.
Deduction
(2) The company is allowed a deduction for the excess.
Mining expenditure
(3) The excess amount must be taken into account in the mining expenditure item of the formula in section DU 7(5).
No other deduction
(4) No other deduction for expenditure incurred in the circumstances described in subsection (1) is allowed under any other provision of this Act.
When subsections (7) and (8) apply
(5) Subsections (7) and (8) apply when—
(a) a mining company complies with section CU 6(2); and
(b) the Commissioner considers a period to be a reasonable period within which to complete the replacement or repair; and
(c) the company incurs expenditure in replacing or repairing the asset after the last day of the period; and
-
(d) the company has an excess amount because the expenditure is more than the total of the following:
(i) the amount of compensation paid; and
(ii) the amount, if any, payable to the company for the disposal of any scrap of the asset.
Deduction
(6) The company is allowed a deduction for the excess.
Limitation on calculation of excess amount
(7) The expenditure incurred after the last day of the period must not be taken into account to determine the existence or amount of an excess amount for the purposes of subsection (1)(c).
Mining expenditure
(8) The expenditure incurred after the last day of the period must be taken into account in the mining expenditure item of the formula in section DU 7(5).
Link with subpart DA
(9) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, Commissioner, deduction, general limitation, general permission, mining company, pay, supplement,
Compare: 2004 No 35 s DU 3
DU 4 Income appropriated to expenditure
-
When this section applies
(1) This section applies when—
(a) a mining company appropriates an amount of income to mining exploration expenditure or mining development expenditure; and
(b) the company makes the appropriation within 2 months after the end of an income year or in a longer time allowed by the Commissioner; and
(c) the amount that the company appropriates is no more than its net income in the income year, calculated as if this section did not exist.
Deduction
(2) The company is allowed a deduction for the part of the amount to which both the following apply:
(a) it is not spent in the income year to which the appropriation relates; and
(b) it will be, or is likely to be, used as mining exploration expenditure or mining development expenditure before the end of the second income year following the income year to which the appropriation relates.
Timing of deduction
(3) The deduction for the part of the amount is allocated to the income year to which the appropriation relates.
Mining expenditure
(4) The part of the amount to which subsection (2)(a) and (b) apply must be taken into account in the mining expenditure item of the formula in section DU 7(5).
Link with subpart DA
(5) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, Commissioner, deduction, general limitation, general permission, income, income year, mining company, mining development expenditure, mining exploration expenditure, net income, supplement,
Compare: 2004 No 35 s DU 4
DU 5 Non-mining asset used to derive income from mining
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When this section applies
(1) This section applies when—
(a) a mining company starts to use, or starts again to use, an asset to derive income from mining; and
(b) immediately before that, the company used the asset to derive income other than income from mining.
Adjustment
(2) The Commissioner may make an adjustment to any deduction of the mining company for the asset for the income year, as between the part of the income year in which the company used the asset to derive income from mining and the part of the income year in which the company did not use the asset to derive income from mining.
Commissioner to consider
(3) The adjustment must be of a kind that the Commissioner considers equitable, having regard to—
(a) any deduction for an amount of depreciation loss that the company has been allowed; and
(b) any other deduction that the company has been allowed for the cost of the asset; and
(c) any other matters that the Commissioner considers relevant.
Defined in this Act: amount, Commissioner, deduction, depreciation loss, income, income from mining, income year, mining company,
Compare: 2004 No 35 s DU 5
DU 6 Depreciation
-
When this section applies: first case
(1) This section applies when—
-
(a) a mining company acquires an asset by incurring—
(i) mining exploration expenditure or mining development expenditure; or
(ii) the exploration expenditure or development expenditure referred to in section DZ 12(2)(a) (Mineral mining: 1954–2005); and
(b) the company is allowed a deduction for the expenditure; and
(c) the company uses the asset, wholly or mainly, to derive income from mining.
When this section applies: second case
(2) This section also applies when—
(a) a mining company complies with section CU 6(2) (Compensation and scrap payment: use to replace or repair asset); and
(b) the company incurs expenditure in replacing or repairing the asset; and
(c) the company is allowed a deduction for the expenditure; and
(d) the company uses the asset, wholly or mainly, to derive income from mining.
No deduction (with exception)
(3) The company is denied a deduction for an amount of depreciation loss for the asset from the time when it uses the asset wholly or mainly to derive income from mining until the time, if any, when it uses the asset wholly or mainly to derive income other than income from mining.
Amount of depreciation loss
(4) The asset has the value described in section CU 10(2) (Mining asset used to derive income other than income from mining) for the purpose of calculating the amount of depreciation loss that the company has for its use of the asset wholly or mainly to derive income other than income from mining.
Link with subpart DA
(5) Subsections (1) to (3) override the general permission.
Defined in this Act: acquire, amount, deduction, depreciation loss, general permission, income, income from mining, mining company, mining development expenditure, mining exploration expenditure, pay,
Compare: 2004 No 35 s DU 6
-
DU 7 Limit on deduction
-
Limit
(1) When a mining company has a mining outgoing excess, there is a limit on the deduction that it is allowed in the income year for the amount taken into account in the mining expenditure item of the formula in subsection (5).
Amount of deduction
(2) The limit is the lesser of—
(a) two-thirds of the mining outgoing excess; and
-
(b) the greater of zero and the amount calculated using the formula—
non-mining income − non-mining expenditure.
Definition of items in formula
(3) In the formula in subsection (2),—
(a) non-mining income is the income other than income from mining of the mining company allocated to the income year:
(b) non-mining expenditure is all the expenditure or loss that the mining company incurs in the income year relating to deriving non-mining income and for which it is allowed a deduction that is allocated to the income year.
Meaning of mining outgoing excess
(4) Mining outgoing excess means the greater of zero and the amount that a mining company calculates for an income year using the formula—
mining expenditure − income from mining.
Definition of items in formula
(5) In the formula in subsection (4),—
-
(a) mining expenditure is an amount consisting of—
(i) all the expenditure or loss that the mining company incurs in the income year relating to deriving income from mining and for which it would be allowed a deduction that would be allocated to the income year; and
(ii) any part of an amount described in section DU 4(4):
(b) income from mining is the income from mining of the mining company allocated to the income year.
Defined in this Act: amount, deduction, income, income from mining, income year, mining company, mining outgoing excess,
Compare: 2004 No 35 s DU 7
DU 8 Meaning of asset for sections DU 1 to DU 7
-
Mining company’s share or interest in asset
(1) Sections DU 1 to DU 7 apply to a share or interest that a mining company has in an asset—
-
(a) to the extent to which the mining company acquired the share or interest by incurring—
(i) mining exploration expenditure or mining development expenditure:
(ii) the exploration expenditure or development expenditure referred to in section DZ 12(2)(a) (Mineral mining: 1954–2005); and
(b) to the extent to which the mining company uses the share or interest for the purpose of deriving income from mining.
Partner’s share or interest in asset
(2) For the purposes of sections DU 1 to DU 7, a partner’s share or interest in each asset of the partnership is the same as the partner’s interest in the totality of the assets of the partnership.
Replaced or repaired asset
(3) For the purposes of sections DU 1 to DU 7,—
(a) an asset that a mining company acquires by incurring expenditure in replacing or repairing the asset is the same asset as the one that was lost, destroyed, or damaged; and
(b) part of an asset that a mining company acquires by incurring expenditure in repairing the asset is part of the asset that was damaged.
Defined in this Act: asset, income from mining, mining company, mining development expenditure, mining exploration expenditure,
Compare: 2004 No 35 s DU 8
-
DU 9 Application of sections to resident mining operators
-
Sections of this subpart applying to resident mining operators
(1) Sections DU 1 to DU 3, and DU 5 to DU 7 apply, with any necessary modifications, to resident mining operators as if resident mining operators were mining companies.
Additional modification of section DU 6
(2) For the purposes of subsection (1), section DU 6(1)(a)(ii) applies as described in section DZ 12(2)(b) (Mineral mining: 1954–2005).
Application of section DU 7
(3) When a resident mining operator has a mining outgoing excess, the total of deductions that it is allowed in the income year for expenditure or loss taken into account in the mining expenditure item of the formula in section DU 7(5) is no more than the lesser of—
(a) the total amount of the expenditure and loss; and
(b) the prescribed amount for the income year.
Meaning of prescribed amount
(4)
Prescribed amount means 50% of the amount by which the income that the resident mining operator derives in an income year, other than from its mining operations or associated mining operations, is more than the total of the expenditure and losses, for which it is allowed deductions, that it incurs in the income year in deriving the income.
Relationship with sections IA 2 to IA 5 and IS 2
(5) Expenditure or loss of a resident mining operator for which it would be allowed a deduction in an income year in the absence of subsection (3) is a tax loss component of the operator in the income year for the purposes of sections IA 2 to IA 5 and IS 2 (which relate to the use of tax losses).
Defined in this Act: amount, associated mining operations, deduction, income, income year, loss, mining company, mining operations, mining outgoing excess, prescribed amount, resident mining operator, tax loss component,
Compare: 2004 No 35 s DU 9
DU 10 Application of sections to non-resident mining operators
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Sections of this subpart and subpart IS applying to non-resident mining operators
(1) Sections DU 1 to DU 6 and IS 1, IS 3, and IS 4 (which relate to the use of tax losses by mining companies) apply, with any necessary modifications, to non-resident mining operators as if non-resident mining operators were mining companies, income from mining were income from a mining venture, mining operations were mining ventures, and associated mining operations were mining ventures.
Application of section DU 1
(2) Section DU 1 applies with the additional modification that subsection (2) is omitted.
Application of section DU 3
(3) Section DU 3 applies with the additional modification that subsections (3) and (6) are omitted.
Application of section DU 4
(4) Section DU 4 applies with the additional modification that subsection (4) is omitted.
Additional modification of section DU 6
(5) For the purposes of subsection (1), section DU 6(1)(a)(ii) applies as described in section DZ 12(2)(b) (Mineral mining: 1954–2005).
Defined in this Act: associated mining operations, income, income from mining, mining company, mining operations, mining venture, non-resident mining operator,
Compare: 2004 No 35 s DU 10
DU 11 Disposal of mining shares by company
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Deduction
(1) When a company disposes of a mining share, the company is allowed a deduction for the cost of the share to it.
Amount of deduction
(2) The cost of the share to the company is the difference between the following 2 sums:
-
(a) the total of—
(i) the consideration that the company gave to acquire the share; and
(ii) any capital the company contributed later for the share:
-
(b) the total of—
(i) any reinvestment profit of the company included in the consideration that the company gave; and
(ii) any reinvestment profit of the company included in the capital that the company contributed.
Link with subpart DA
(3) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, company, deduction, general limitation, general permission, mining share, reinvestment profit,
Compare: 2004 No 35 s DU 11
-
DU 12 Amount written off by holding company
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Deduction
(1) A holding company of a mining company is allowed a deduction for an amount written off a loan it made to the mining company.
Exclusions
(2) The following are not included within the words
“an amount written off a loan it made to the mining company”
in subsection (1):(a) an amount of interest that the holding company writes off; or
(b) an amount of a loan to the extent to which a mining holding company makes the loan from its reinvestment profit; or
-
(c) an amount of a loan made on or after 1 October 1978 to the extent to which the loan—
(i) is made to obtain an unfair advantage for tax purposes; and
(ii) is excessive, having regard to previous loans made by the holding company and any other circumstances.
Amount of deduction
(3) The deduction is no more than the lesser of—
(a) 50% of the amount that, in the absence of this section, would be the net income of the holding company in the tax year in which the amount is written off; and
(b) the prescribed proportion of all the mining exploration expenditure and mining development expenditure incurred by the mining company in the income year in which the amount is written off, reduced by all the deductions the holding company is allowed under this section in all income years before the income year in which the amount is written off.
Timing of deduction
(4) The deduction for the amount written off is allocated to the income year in which the amount is written off.
Reduction of amount
(5) The amount calculated under subsection (3) is reduced in the circumstances described in section DZ 12(4) (Mineral mining: 1954–2005).
Link with subpart DA
(6) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, general limitation, general permission, holding company, income year, interest, loan, mining company, mining development expenditure, mining exploration expenditure, net income, prescribed proportion, reinvestment profit, supplement, tax,
Compare: 2004 No 35 s DU 12
Subpart DV—Expenditure specific to certain entities
Superannuation funds
DV 1 Publicising superannuation funds
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When this section applies
(1) This section applies when a superannuation fund incurs expenditure to which all the following apply:
(a) it is incurred in developing, marketing, selling, promoting, or advertising the fund; and
(b) it is not incurred in acquiring a building, equipment, land, machinery, or plant; and
(c) it is assessable income of the recipient.
Deduction
(2) The superannuation fund is allowed a deduction for the expenditure.
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation and the exempt income limitation. The other general limitations still apply.
Defined in this Act: assessable income, capital limitation, deduction, exempt income limitation, general limitation, general permission, superannuation fund, supplement,
Compare: 2004 No 35 s DV 1
DV 2 Transfer of expenditure to master fund
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When this section applies
(1) This section applies when—
(a) a superannuation fund (the member superannuation fund) invests some or all of its funds in another superannuation fund (the master superannuation fund); and
(b) while the member superannuation fund has funds invested in the master superannuation fund, the member superannuation fund incurs expenditure of a kind described in subsection (2).
Expenditure on publicising or managing
(2) The expenditure is expenditure to which all the following apply:
-
(a) it is incurred—
(i) in developing, marketing, selling, promoting, or advertising the fund; or
(ii) in managing the fund; and
(b) it is not incurred in acquiring a building, equipment, land, machinery, or plant; and
(c) it is assessable income of the recipient.
When expenditure becomes master superannuation fund’s
(3) The member superannuation fund may choose to treat some or all of the expenditure as expenditure incurred by the master superannuation fund in deriving assessable income.
How election made
(4) The member superannuation fund makes the election by giving notice to the Commissioner within 1 of the following times:
(a) the time in which its return of income must be filed under section 37 of the Tax Administration Act 1994; or
(b) a longer time allowed by the Commissioner.
Effect of election
(5) When the member superannuation fund makes an election, subsections (6) to (9) apply to the part or the whole, as chosen, of the expenditure.
When expenditure incurred
(6) The expenditure is treated as being incurred by the master superannuation fund in the same income year as that in which it was incurred by the member superannuation fund.
Deduction allowed to master superannuation fund
(7) The master superannuation fund is allowed a deduction for the expenditure. The amount of the deduction is limited by subsection (8).
Amount of deduction
(8) The formula in section DV 3 is used to calculate the maximum deduction that the master superannuation fund is allowed for expenditure of the member superannuation fund treated as being incurred by the master superannuation fund.
Deducted expenditure not incurred by member superannuation fund
(9) The expenditure for which the master superannuation fund is allowed a deduction is treated as not being incurred by the member superannuation fund.
Link with subpart DA
(10) The link between this section and subpart DA (General rules) is as follows:
-
(a) for subsection (7),—
(i) it supplements the general permission:
(ii) it overrides the capital limitation and the exempt income limitation:
(iii) the other general limitations still apply:
(b) subsection (9) overrides the general permission.
Defined in this Act: amount, assessable income, capital limitation, Commissioner, deduction, exempt income limitation, general limitation, general permission, income year, notice, return of income, superannuation fund, supplement,
Compare: 2004 No 35 s DV 2
DV 3 Formula for calculating maximum deduction
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Formula
(1) The formula referred to in section DV 2(8) is—
taxable income − non-resident passive income.
Definition of items in formula
(2) The items in the formula are defined in subsections (3) and (4).
Taxable income
(3) Taxable income is the amount that would be the master superannuation fund’s taxable income in the tax year in which the expenditure is incurred in the absence of sections DV 2 to DV 4.
Non-resident passive income
(4) Non-resident passive income is the total of any amounts of non-resident passive income of any of the kinds to which section RF 2(5) (Non-resident passive income) applies derived by the master superannuation fund in the corresponding income year in which the expenditure is incurred.
Defined in this Act: amount, corresponding income year, deduction, non-resident passive income, superannuation fund, tax year, taxable income,
Compare: 2004 No 35 s DV 3
DV 4 Carry forward of expenditure
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When this section applies
(1) This section applies when—
(a) the expenditure treated as being incurred by the master superannuation fund, under section DV 2(3), is more than the maximum amount for which it is allowed a deduction, as calculated under DV 3, so there is surplus expenditure; and
(b) the member superannuation fund chooses to deal with the surplus expenditure under this section, rather than deducting it itself; and
(c) the member superannuation fund has funds invested in the master superannuation fund at the time referred to in section DV 2(1)(b) and while its election under section DV 2(3) continues and while it deals with the surplus expenditure under this section.
KiwiSaver schemes
(2) For the avoidance of doubt, section 144 of the KiwiSaver Act 2006 applies to a registered superannuation scheme that converts to a KiwiSaver scheme for the purpose of determining if subsection (1)(c) applies.
Surplus carried forward
(3) The member superannuation fund carries the surplus expenditure forward to the next income year and takes the following steps:
(a) it gets the combined expenditure by adding the surplus expenditure to the expenditure, if any, incurred by it in the income year that it chooses to treat as being incurred by the master superannuation fund:
(b) it calculates the maximum deduction for the income year, using the formula in section DV 3:
-
(c) if the combined expenditure is the same as or less than the maximum deduction, it—
(i) treats the surplus expenditure as expenditure incurred by the master superannuation fund in deriving assessable income in the income year; and
(ii) applies subsections (5) to (8):
-
(d) if the combined expenditure is more than the maximum deduction, it—
(i) carries forward the new surplus expenditure to the next income year; and
(ii) applies subsection (4).
Surplus dealt with until gone
(4) The member superannuation fund repeats the steps in subsection (3) for the following income years until all surplus expenditure is deducted.
Deduction allowed to master superannuation fund
(5) Expenditure treated under subsection (3)(c)(i) as incurred by the master superannuation fund in deriving income is allowed as a deduction in the income year in which it is so treated. The amount of the deduction is limited by subsection (6).
Amount of deduction
(6) The maximum amount of a deduction under subsection (5) is the maximum deduction for the income year, calculated using the formula in section DV 3.
Deducted expenditure not incurred by member superannuation fund
(7) Expenditure for which the master superannuation fund is allowed a deduction is treated as not being incurred by the member superannuation fund.
Sequential deductions
(8) Expenditure for which the master superannuation fund is allowed a deduction must be deducted in sequence according to the income year in which the member superannuation fund incurred it.
Link with subpart DA
(9) The link between this section and subpart DA (General rules) is as follows:
(a) subsection (5) supplements the general permission and overrides the capital limitation; the other general limitations still apply:
(b) subsection (7) overrides the general permission.
Defined in this Act: amount, assessable income, capital limitation, deduction, general limitation, general permission, income, income year, KiwiSaver scheme, superannuation fund, superannuation scheme, supplement,
Compare: 2004 No 35 s DV 4
Other entities
DV 5 Investment funds: transfer of expenditure to master funds
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When this section applies
(1) This section applies when—
(a) a group investment fund that derives category A income, a public unit trust, or a superannuation fund (the member fund) invests some or all of its funds in a master fund; and
(b) while the member fund has funds invested in the master fund, the member fund incurs expenditure of a kind described in subsection (2); and
(c) the member fund has some or all of its funds invested in the master fund throughout the period starting at the time at which the member fund incurs the expenditure and ending with the close of the last day of the income year in which the expenditure is deducted by the master fund under this section.
Expenditure described
(2) The expenditure is expenditure for which the member fund is allowed a deduction,—
(a) including expenditure on a financial arrangement that is denominated in New Zealand dollars and for which expenditure is allocated using the yield to maturity method set out in subpart EW (Financial arrangements rules); and
-
(b) not including—
(i) expenditure on any other financial arrangement; or
(ii) expenditure on revenue account property.
When expenditure becomes master fund’s
(3) The expenditure incurred by the member fund may be transferred to the master fund, subject to the following conditions:
(a) the member fund and the master fund must agree to the transfer of the expenditure; and
(b) the member fund may transfer expenditure only to the extent to which it has a tax loss in the corresponding tax year, with the tax loss calculated as if this section did not exist; and
(c) a member fund that is a group investment fund that derives category A income may transfer only expenditure that relates to the category A income.
Income year in which investment stops
(4) In an income year in which the member fund stops investing in the master fund,—
(a) neither the master fund nor the member fund is allowed a deduction for expenditure that would otherwise be transferable; and
(b) the member fund must treat the expenditure as a loss balance.
When expenditure incurred
(5) The expenditure referred to in subsection (3) is treated as being incurred by the master fund in the income year in which it is transferred by the member fund.
Deduction allowed to master fund
(6) The master fund is allowed a deduction for the expenditure, subject to the following conditions:
(a) a master fund that is a group investment fund that derives category A income may deduct expenditure only from its category A income; and
(b) the amount of the deduction is limited by subsection (7).
Amount of deduction
(7) The formula in section DV 6 is used to calculate the maximum deduction that the master fund is allowed for expenditure of the member fund treated as being incurred by the master fund.
Additional transfer
(8) If, after the date on which the master fund has filed its return of income, the master fund is able to deduct more than the amount actually deducted, the Commissioner may allow the member fund to transfer expenditure to the extent of the difference after the return of income has been filed.
Deducted expenditure not incurred by member fund
(9) The expenditure for which the master fund is allowed a deduction is treated as not being incurred by the member fund.
Link with subpart DA
(10) The link between this section and subpart DA (General rules) is as follows:
(a) subsection (6) supplements the general permission and overrides the capital limitation; the other general limitations still apply:
(b) subsection (9) overrides the general permission.
Defined in this Act: amount, capital limitation, category A income, Commissioner, deduction, financial arrangement, general limitation, general permission, group investment fund, income year, loss balance, master fund, public unit trust, return of income, revenue account property, superannuation fund, supplement, tax loss, tax year,
Compare: 2004 No 35 s DV 5
DV 6 Formula for calculating maximum deduction
-
Formula used to calculate maximum deduction
(1) The formula referred to in section DV 5(7) is—
taxable income − non-resident passive income.
Definition of items in formula
(2) The items in the formula are defined in subsections (3) and (4).
Taxable income
(3) Taxable income is the amount that would be the master fund’s taxable income in the tax year in which the expenditure is transferred in the absence of sections DV 5 to DV 7.
Non-resident passive income
(4) Non-resident passive income is the total of any amounts of non-resident passive income of any of the kinds to which section RF 2(5) (Non-resident passive income) applies derived by the master fund in the corresponding income year in which the expenditure is incurred.
Defined in this Act: amount, corresponding income year, deduction, master fund, non-resident passive income, taxable income,
Compare: 2004 No 35 s DV 6
DV 7 Carry forward of expenditure
-
Member fund carrying expenditure forward
(1) For the purposes of section DV 5, if a member fund incurs more expenditure than the member fund and the master fund agree can be transferred, the member fund may carry forward the expenditure for transfer in a later income year.
Expenditure as loss balance
(2) If the member fund carries forward expenditure in an income year, the member fund may treat some or all of the expenditure as a loss balance for the corresponding tax year.
Defined in this Act: income year, loss balance, master fund, tax year,
Compare: 2004 No 35 s DV 7
DV 8 Non-profit organisations
-
When this section applies
(1) This section applies when an incorporated or unincorporated organisation—
(a) does not have the purpose of making a profit for a proprietor, member, or shareholder; and
(b) has a constitution that prohibits a distribution of property in any form to a member, proprietor, or shareholder.
Amount of deduction
(2) The organisation is allowed a deduction for the lesser of—
(a) $1,000; and
(b) the amount that would be the organisation’s net income in the absence of this section.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, net income, shareholder, supplement,
Compare: 2004 No 35 s DV 8
DV 9 Trusts
-
No deduction
(1) A person who derives beneficiary income is denied a deduction for expenditure or loss that a trustee incurs in deriving the income.
Trustee income
(2) For the purpose of determining the deductions that a trustee is allowed in an income year, beneficiary income of beneficiaries of the trust in the income year is treated as trustee income.
Link with subpart DA
(3) The link between this section and subpart DA (General rules) is as follows:
(a) subsection (1) overrides the general permission:
(b) subsection (2) supplements the general permission; the general limitations still apply.
Defined in this Act: beneficiary income, deduction, general limitation, general permission, income year, supplement, trustee, trustee income,
Compare: 2004 No 35 s DV 9
DV 10 Building societies
-
Deduction
(1) A building society is allowed a deduction for—
(a) expenditure incurred on money borrowed by way of withdrawable shares:
(b) interest and other financial charges incurred in providing money that is used to provide an interest-free loan to a person who holds a terminating share:
(c) an amount incurred in purchasing a balloted loan right from a person who holds a terminating share.
Timing of deduction
(2) The deduction for the amount referred to in subsection (1)(c) is allocated to the income year in which the amount is paid.
Meaning of balloted loan right
(3) In this section, balloted loan right means a right arising from a ballot that—
(a) is held by or for a building society; and
(b) is of terminating shares; and
(c) is held for the purpose of finding out which of the holders of the shares are entitled to receive an interest-free loan relating to their shares.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and other general limitations still apply.
Defined in this Act: amount, balloted loan right, building society, capital limitation, deduction, general limitation, general permission, income year, pay, terminating share, withdrawable share,
Compare: 2004 No 35 s DV 10
DV 11 Distribution to member of co-operative company, excluded from being dividend
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Deduction
(1) A co-operative company, or a company owned by a co-operative company, is allowed a deduction for a distribution made for an income year to a member of the co-operative company if an amount of the distribution is excluded by section CD 34 (Distribution to member of co-operative company based on member’s transactions) from being a dividend.
Amount of deduction
(2) The amount of the deduction is the amount of the distribution that is excluded by section CD 34 from being a dividend.
Timing of deduction
(3) The deduction is allocated to the income year for which the distribution is made.
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: company, co-operative company, deduction, general permission, general limitation, income year, shareholder,
Compare: 2004 No 35 s DV 10B
DV 12 Maori authorities: donations
-
Deduction
(1) A Maori authority is allowed a deduction for—
(a) a donation that it makes to a Maori association, as defined in the Maori Community Development Act 1962, for the purposes of the Act:
(b) a charitable or other public benefit gift that it makes to a society, institution, association, organisation, trust, or fund of any of the kinds listed in schedule 32 (Recipients of charitable or other public benefit gifts).
Amount of deduction
(2) The deduction for the total of all donations and gifts made in an income year is limited to 5% of the amount that would be the Maori authority’s net income in the corresponding tax year in the absence of this section.
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, charitable or other public benefit gift, deduction, general limitation, general permission, income year, Maori authority, net income, supplement, tax year,
Compare: 2004 No 35 s DV 11
DV 13 Group companies
-
When this section applies
(1) This section applies when,—
(a) in an income year, a company (company A) that is part of a wholly-owned group of companies derives income under section CV 1 (Group companies); and
(b) no other provision of this Act allows company A a deduction for the expenditure it incurs in deriving the income; and
(c) if the wholly-owned group of companies were a single company, the single company would be allowed a deduction for the expenditure that company A incurs in deriving the income.
Amount, and timing, of deduction
(2) Company A is allowed a deduction for the expenditure in the income year in which the income is derived.
Link with subpart DA
(3) This section supplements the general permission and overrides the exempt income limitation. The other general limitations still apply.
Defined in this Act: company, deduction, exempt income limitation, general limitation, general permission, income, income year, supplement, wholly-owned group of companies,
Compare: 2004 No 35 s DV 12
DV 14 Amalgamated company: expenditure on improvements for farming, horticultural, aquacultural, and forestry businesses
-
When this section applies
(1) This section applies when—
(a) an amalgamating company ends its existence on a resident’s restricted amalgamation; and
(b) the amalgamated company acquires land or a business from the amalgamating company; and
(c) the amalgamating company would have been allowed a deduction under any of section DO 4, DO 5, DO 6, DO 12, or DP 3 (which relate to improvements and expenditure on land) for the land or business if the amalgamation had not occurred.
Deduction
(2) While the amalgamated company holds the land or carries on the business, it is allowed the deduction that the amalgamating company would have been allowed under section DO 4, DO 5, DO 6, DO 12, or DP 3.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amalgamated company, amalgamating company, business, deduction, general limitation, general permission, resident’s restricted amalgamation, supplement,
Compare: 2004 No 35 s DV 13
DV 15 Amalgamated companies: property passing on resident’s restricted amalgamation
-
When this section applies
(1) This section results from sections FO 8 and FO 10 (which relate to resident’s restricted amalgamations).
Deduction for bad debts or expenditure or loss
(2) On a resident’s restricted amalgamation, an amalgamated company is allowed a deduction for an amount written off as bad, or an amount of expenditure or loss, including an amount of depreciation loss, incurred as a result of something that the amalgamating company did or did not do in the circumstances set out in section FO 8.
Depreciation loss for property transferred
(3) On a resident’s restricted amalgamation, an amalgamating company is allowed a deduction for an amount of depreciation loss for property transferred to the amalgamated company for the period described in section FO 10(7).
Link with subpart DA
(4) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amalgamated company, amalgamating company, amount, deduction, depreciation loss, general permission, resident’s restricted amalgamation,
Compare: 2004 No 35 ss FE 3, FE 6A
DV 16 Consolidated groups: intra-group transactions
-
When this section applies
(1) This section applies in relation to a consolidated group of companies for the purposes of section FM 10 (Expenditure: intra-group transactions).
No deduction (with exception)
(2) A company that is a part of a consolidated group of companies is denied a deduction for expenditure or loss incurred through a payment or disposal to, or transaction or arrangement with, another group company, and a deduction would not be allowed for the expenditure or loss if the group were 1 company, except to the extent to which the expenditure or loss arises—
(a) from the company’s acquisition of trading stock; or
(b) under sections FM 15 to FM 23 (which relate to accounting for particular property).
Other expenditure or loss
(3) A company that is part of a consolidated group is—
(a) allowed a deduction for expenditure or loss or an amount of depreciation loss:
(b) denied a deduction for expenditure or loss or amount of depreciation loss except to the extent to which the expenditure or loss is interest on money that the company has borrowed outside the consolidated group.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: amount, arrangement, company, consolidated group, deduction, depreciation loss, general permission, interest, pay,
Compare: 2004 No 35 s HB 2(1)(b), (d)
DV 17 Consolidated groups: expenditure or loss incurred by group companies
-
When this section applies
(1) This section results from sections FM 11 and FM 12 (which relate to expenditure or loss incurred by group companies).
Deduction allowed: nexus with income derivation
(2) To the extent set out in section FM 11, if the consolidated group would be allowed a deduction for an item of expenditure or loss as 1 company because of a nexus between the expenditure and the income or carrying on of a business by another group company, a company that is part of the consolidated group is allowed a deduction.
No deduction except for interest on money borrowed
(3) To the extent set out in section FM 12, if the consolidated group would be denied a deduction for an item of expenditure or loss as 1 company, a company that is part of the consolidated group is denied a deduction, except for an amount of expenditure or loss that is interest on money borrowed by the company from a group company in the circumstances described in that section.
Link with subpart DA
(4) Subsection (2) supplements the general permission, and the general limitations still apply. Subsection (3) overrides the general permission.
Defined in this Act: amount, arrangement, company, consolidated group, deduction, depreciation loss, general permission, loss, pay,
Compare: 2004 No 35 s HB 2(1)(c)
DV 18 Statutory producer boards and co-operative companies
-
When this section applies
(1) This section applies for the purposes of sections OB 73 and OB 78 (which relate to imputation credits attached to cash distributions by statutory producer boards and co-operative companies) when a producer board or co-operative company chooses to treat a distribution as a dividend.
No deduction
(2) The producer board or co-operative company making the distribution is denied a deduction for the amount of the distribution.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: amount, co-operative company, deduction, general permission, imputation credit, statutory producer board,
Compare: 2004 No 35 ss ME 30(2), ME 35(2)
DV 19 Association rebates
-
When this section applies
(1) This section applies when an association,—
(a) enters into a mutual transaction from which it derives income to which section CB 33 (Amounts derived by mutual associations) applies; and
(b) in relation to the transactions, pays association rebates to its members.
Deduction
(2) The association is allowed a deduction for the lesser of—
(a) the amount described in subsection (4); or
(b) the amount calculated using the formula in subsection (5).
Allocation
(3) The deduction is allowed in the income year in which the association derives the income referred to in section CB 33.
Amount paid
(4) The amount referred to in subsection (2)(a) is the total amount that the association pays as association rebates to members for those mutual transactions that arise in the income year and which the association takes into account in determining its net income or net loss. In the calculation of the total amount, it is irrelevant that the amount paid may be limited or reduced because a member of the association has a share or interest in the capital of the association.
Amount under formula
(5) The amount is calculated using the formula—
assessable income − (deductions + amount distributed).
Definition of items in formula
(6) In the formula,—
(a) assessable income is the total amount of the association’s assessable income attributable to the mutual transactions:
(b) deductions are the total deductions that the association is allowed, other than under this section, that are attributable to the assessable income:
(c) amount distributed is the total amount that the association distributes to members in the income year through a cash distribution for which a determination is made under section OB 82(1)(a) (When and how co-operative company makes election).
Statutory producer boards’ deductions
(7) When an association is a statutory producer board that pays an association rebate to a member—
(a) the amount allowed as a deduction is the amount referred to in subsection (4):
(b) the board may choose whether the rebate is a deduction in the income year in which the amount is paid, or in the income year in which the mutual transaction giving rise to the amount is made.
Link with subpart DA
(8) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, assessable income, association, association rebate, capital limitation, deduction, general permission, imputation credit, income, income year, member, mutual transaction, net income, net loss, pay, share, statutory producer board,
Compare: 2004 No 35 s HF 1(2), (3)(a), (b), (4)
Subpart DW—Expenditure specific to certain industries
DW 1 Airport operators
-
No deduction (with exception)
(1) An airport operator is denied a deduction for expenditure or loss to the extent to which the expenditure or loss is, in terms of the joint venture agreement that relates to the airport operator, a charge against any part of the joint income of the parties to the agreement that has been allocated or distributed to any party.
Meaning of expenditure
(2) In subsection (1), expenditure includes a provision that is treated as expenditure or loss in the nature of interest under sections HR 5 and HR 6 (which relate to airport operators).
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: airport operator, deduction, expenditure, general permission, income, joint venture agreement,
Compare: 2004 No 35 s DW 1
DW 2 Bloodstock racing
-
No deduction
(1) A person is denied a deduction for expenditure or loss that they incur—
(a) on the racing of bloodstock; or
(b) in relation to the racing of bloodstock.
No deduction (with exception)
(2) A person is denied a deduction for expenditure or loss that they incur in preparing bloodstock for racing, except, first, when—
(a) the person is in the business of breeding bloodstock; and
(b) they incur the expenditure or loss in preparing for sale bloodstock that they are preparing for racing; and
(c) they do not race the bloodstock on which they incur the expenditure or loss.
No deduction (with exception)
(3) A person is denied a deduction for expenditure or loss that they incur in preparing bloodstock for racing, except, second, when—
(a) the person incurs the expenditure or loss in preparing the bloodstock for racing; and
(b) they receive consideration for preparing the bloodstock for racing; and
(c) the consideration is income of the person.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: bloodstock, business, deduction, general permission, income, loss,
Compare: 2004 No 35 s DW 2
DW 3 Non-resident general insurers, shippers, and film renters
-
No deduction
(1) A person listed in subsection (2) is denied a deduction for expenditure incurred in deriving the income described in the relevant section.
Persons
(2) The persons referred to in subsection (1) are—
(a) a non-resident person who derives income under section CR 3 (Income of non-resident general insurer):
(b) a non-resident person who derives income under section CV 16 (Non-resident shippers) for cargo, mail, or passengers shipped outside New Zealand:
(c) a non-resident person who derives income under section CV 17 (Non-resident film renters) from the activities described in that section.
Non-resident shipper’s expenditure on depreciation
(3) The non-resident person referred to in subsection (2)(b) has no amount of depreciation loss in relation to that income.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: amount, deduction, depreciation loss, film, general permission, income, insurer, New Zealand, non-resident,
Compare: 2004 No 35 ss FC 15, FC 20, FC 21(3), (5)
Subpart DX—Other expenditure
DX 1 Testamentary annuities
-
When this section applies
(1) This section applies when—
-
(a) property is subject to the payment of an annuity—
(i) because of a provision in a will; or
(ii) because of a court order under the Family Protection Act 1955; or
(iii) because of a deed of family arrangement; and
(b) the property, or property substituted for it, is transferred to a beneficiary; and
(c) the property transferred, or property that the beneficiary substitutes for it, is charged with the payment of the annuity or part of the annuity.
Deduction
(2) The owner of the property, or the substituted property, is allowed a deduction for an amount that they pay on account of the annuity.
Exclusion
(3) The owner is denied a deduction—
(a) if the owner is not a beneficiary but a person who has bought the property subject to the condition that they assume the liability for the annuity, or a part of it:
(b) to the extent to which the annuity is payable under a court order or under a deed of family arrangement and represents consideration for the purchase of the property, or the substituted property, by the owner.
Amount of deduction
(4) The deduction is limited in an income year to the amount that would be the net income of the owner for the corresponding tax year if the owner’s only income in the income year were from the property, or the substituted property.
Meaning of beneficiary
(5) In this section, beneficiary—
-
(a) means—
(i) a person to whom a testator has left the property in their will; or
(ii) a person to whom the testator has given a right to buy the property in their will; and
-
(b) includes a person who is entitled to the property under—
(i) an order of a court under the Family Protection Act 1955; or
(ii) a deed of family arrangement.
Link with subpart DA
(6) This section supplements the general permission and overrides the private limitation. The other general limitations still apply.
Defined in this Act: amount, arrangement, beneficiary, deduction, general limitation, general permission, income, income year, net income, pay, private limitation, supplement, tax year,
Compare: 2004 No 35 s DX 1
-
DX 2 Tax credits: conduit financing arrangements
-
When this section applies
(1) This section applies when a company derives a dividend from a foreign company, or a person resident in New Zealand and associated at the time with the company derives a dividend from a foreign company, in the circumstances set out in section LL 7 (Conduit financing arrangements).
Limited deduction
(2) Despite section BD 2 (Deductions), the company is allowed a deduction for the expenditure for an income year only to the extent set out in section LL 7(2).
Defined in this Act: associated person, company, deduction, dividend, foreign company, income year, resident in New Zealand,
Compare: 2004 No 35 s LF 7
DX 3 Tax credits: supplementary dividend holding companies
-
When this section applies
(1) This section applies when a supplementary dividend holding company derives a supplementary dividend in relation to which its annual total deduction is allocated as described in section LP 10 (Limitation on deductions).
Limited deduction
(2) Despite section BD 4 (Allocation of deductions to particular income years), the company is allowed a deduction for the expenditure for an income year only to the extent set out in section LP 10(1).
Defined in this Act: annual total deduction, deduction, income year, supplementary dividend holding company,
Compare: 2004 No 35 ss LE 3(10), LE 4
Subpart DZ—Terminating provisions
DZ 1 Commercial bills before 31 July 1986
-
Deduction
(1) A person is allowed a deduction if they acquire a commercial bill from another person, other than under a relationship agreement, and derive income under section CZ 6 (Commercial bills before 31 July 1986) on the redemption or disposal of the commercial bill.
Amount of deduction
(2) The amount of the deduction is the value of the commercial bill on the date on which the person acquired it.
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, commercial bill, deduction, general limitation, general permission, income, relationship agreement, supplement,
Compare: 2004 No 35 s DZ 1
DZ 2 Life insurers acquiring property before 1 April 1988
-
When this section applies
(1) This section applies when—
(a) a life insurer started carrying on the business of providing life insurance on or before the last day of the 1988–89 income year; and
-
(b) on the last day of the 1987–88 income year the life insurer’s Life Insurance Fund covered some or all of the following matters:
(i) superannuation policies; and
(ii) pre-1983 mortgage repayment insurance policies; and
(iii) annuities that had been granted; and
(c) the life insurer, as part of the business, acquired property before 1 April 1988; and
(d) the life insurer, as part of the business, disposes of the property; and
-
(e) either—
(i) the life insurer has not already been allowed a deduction for the property, whether under section DR 2 (Disposal of property) or any other provision; or
(ii) the life insurer has been allowed a deduction for the property, but only for an amount of depreciation loss or because of the application of the old financial arrangements rules or the financial arrangements rules; and
(f) section DR 2 does not apply to the disposal.
Deduction
(2) The life insurer is allowed a deduction for the amount quantified in section EZ 1 (Life insurers acquiring property before 1 April 1988).
Meaning of superannuation policy
(3)
Superannuation policy means a life insurance policy—
-
(a) that—
(i) is vested in a superannuation fund that was or was treated as being a superannuation category 1 scheme on or before 17 December 1987, not including a scheme that was classified by the Government Actuary as a personal pension superannuation scheme and that admitted new members after 17 December 1987; or
(ii) was effected for the purposes of any such superannuation fund; or
(iii) was accepted by any such superannuation fund for the purposes of the fund; and
(b) that has not ceased to be a policy for the purposes of the superannuation fund.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, depreciation loss, financial arrangements rules, general limitation, general permission, income year, life insurance, Life Insurance Fund, life insurance policy, life insurer, old financial arrangements rules, pay, property, superannuation category 1 scheme, superannuation fund, superannuation policy, superannuation scheme,
Compare: 2004 No 35 s DZ 2
DZ 3 Petroleum mining: development expenditure from 1 October 1990 to 15 December 1991
-
Deduction
(1) A petroleum miner is allowed a deduction for petroleum mining development expenditure incurred by them on or after 1 October 1990 and before or on 15 December 1991. This subsection is overridden by subsection (2).
Relationship with section DZ 4
(2) The petroleum miner is denied a deduction for petroleum mining development expenditure as described in subsection (1) if it has been deducted under—
(a) section DZ 4; or
(b) sections 214D to 214M of the Income Tax Act 1976 as they were immediately before their repeal by section 15 of the Income Tax Amendment Act (No 5) 1992.
Timing of deduction
(3) The deduction is allocated under section EZ 3 (Petroleum development expenditure from 1 October 1990 to 15 December 1991).
Meaning of petroleum mining development expenditure
(4) In this section, petroleum mining development expenditure has the same meaning as in section 214D of the Income Tax Act 1976 immediately before its repeal by section 15 of the Income Tax Amendment Act (No 5) 1992.
Link with subpart DA
(5) This section supplements the general permission. The general limitations still apply.
Defined in this Act: deduction, general limitation, general permission, petroleum miner, petroleum mining development expenditure, supplement,
Compare: 2004 No 35 s DZ 3
DZ 4 Expenditure on abandoned exploratory well before 16 December 1991
-
Deduction
(1) A petroleum miner is allowed a deduction for expenditure that they incur before 16 December 1991 in drilling, testing, completing, and abandoning an exploratory well if—
(a) the miner seals and abandons the well before commercial production from the well starts; and
(b) the expenditure has not been deducted in any earlier income year.
Sealing and abandoning well
(2) To seal and abandon an exploratory well, a petroleum miner must make a declaration under the Oaths and Declarations Act 1957 that they do not intend—
(a) to use the exploratory well in petroleum mining operations; or
(b) to apply for an existing privilege over the area containing the exploratory well.
Timing of deduction
(3) The deduction is allocated to the income year in which the well is sealed and abandoned.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, commercial production, deduction, existing privilege, exploratory well, general limitation, general permission, income year, petroleum miner, petroleum mining operations, seal and abandonment,
Compare: 2004 No 35 s DZ 4
DZ 5 Farm-out arrangements for petroleum mining before 16 December 1991
-
Deduction: excess expenditure incurred before 16 December 1991
(1) A transferee under a farm-out arrangement is allowed a deduction of excess expenditure incurred before 16 December 1991 in a farm-out arrangement entered into before 16 December 1991, and for which a deduction has not been allowed in any earlier income year. The deduction is allowed under section DT 1 (Petroleum exploration expenditure) or DT 5 (Petroleum development expenditure).
Deduction: excess expenditure incurred on or after 16 December 1991
(2) A transferee under a farm-out arrangement is allowed a deduction of excess expenditure incurred on or after 16 December 1991 in a farm-out arrangement entered into before 16 December 1991 if the expenditure has the character of exploratory well expenditure, petroleum exploration expenditure, or petroleum development expenditure. The deduction is allowed under section DT 1 or DT 5 to DT 7 (which relate to petroleum development expenditure) and quantified and allocated under whichever of sections EJ 12 to EJ 16 (which relate to petroleum mining) applies.
Reduction of deductions
(3) A transferor under a farm-out arrangement entered into before 16 December 1991 must reduce, but is denied as a deduction, the deductions described in subsection (4) by the amount determined under subsection (5).
Deductions to which subsection (3) applies
(4) The deductions to which subsection (3) applies are deductions for expenditure incurred before, on, or after 16 December 1991 that—
(a) are not deductions of a kind referred to in subsection (5)(a) to (c); and
-
(b) are attributable to—
(i) the petroleum permit to which the farm-out arrangement relates; and
(ii) a licence-specific asset or permit-specific asset held for conducting petroleum mining operations under the petroleum permit.
Amount of reduction
(5) The amount of the reduction under subsection (4), in an income year, is the same amount as would have been determined under section 214I(2) and (3) of the Income Tax Act 1976 immediately before its repeal by section 15 of the Income Tax Amendment Act (No 5) 1992, as if references in section 214I(2) and (3) to deferred deductions were references to any deductions, deferred or not, attributable to the relevant permit or asset, except deductions for—
(a) residual expenditure; and
(b) expenditure incurred on or before the date on which the application for an existing privilege or prospecting permit for petroleum was submitted for the relevant licence area; and
(c) expenditure that is neither petroleum exploration expenditure nor petroleum development expenditure.
Some definitions
(6) In subsections (2) to (5), excess expenditure, farm-out arrangement, licence-specific assets, permit-specific asset, transferee, and transferor have the same meanings as in section 214D of the Income Tax Act 1976 immediately before its repeal by section 15 of the Income Tax Amendment Act (No 5) 1992.
Link with subpart DA
(7) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, excess expenditure, existing privilege, exploratory well expenditure, farm-out arrangement, general limitation, general permission, income year, licence-specific assets, permit-specific asset, petroleum, petroleum development expenditure, petroleum exploration expenditure, petroleum mining operations, petroleum permit, prospecting permit, residual expenditure, supplement, transferee, transferor,
Compare: 2004 No 35 s DZ 5
DZ 6 Partnership interests and disposal of part of asset before 16 December 1991
-
In sections DZ 3 to DZ 5, unless the context requires otherwise,—
(a) a partner is treated as having a share or interest in a petroleum permit or other property of a partnership to the extent of their income interest in the partnership:
(b) references to the disposal of an asset apply equally to the disposal of part of an asset.
Defined in this Act: dispose, income, petroleum permit,
Compare: 2004 No 35 s DZ 6
DZ 7 Petroleum mining operations outside New Zealand before 16 December 1991
-
Sections DZ 3 to DZ 6 apply, with any necessary modifications, to a petroleum miner undertaking petroleum mining operations that are—
(a) outside New Zealand and undertaken through a branch or a controlled foreign company; and
(b) substantially the same as the petroleum mining activities governed by this Act.
Defined in this Act: controlled foreign company, New Zealand, petroleum miner, petroleum mining operations,
Compare: 2004 No 35 s DZ 7
DZ 8 Buying patent rights before 1 April 1993
-
When this section applies
(1) This section applies when a person buys patent rights before 1 April 1993 and uses them in deriving their income. In this section, if the person dies after incurring expenditure on buying the rights, references to the person include their personal representative, a trustee of their estate, and a beneficiary of their estate.
Deduction
(2) The person is allowed a deduction of the amount quantified in section EZ 7(2) (Buying patent rights before 1 April 1993).
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, patent rights, supplement, trustee,
Compare: 2004 No 35 s DZ 8
DZ 9 Premium paid on land leased before 1 April 1993
-
When this section applies
(1) This section applies when a person (person A) leases land that they use in deriving their income and a grant or renewal of the lease occurs before 1 April 1993.
Deduction
(2) Person A is allowed a deduction of the amount quantified in section EZ 8(2) (Premium paid on land leased before 1 April 1993).
Link with subpart DA
(3) This section supplements the general permission. The general limitations still apply.
Defined in this Act: amount, deduction, general limitation, general permission, income, lease, premium, supplement,
Compare: 2004 No 35 s DZ 9
DZ 10 General insurance with risk period straddling 1 July 1993
-
When this section applies
(1) This section applies when—
(a) a company carries on a business of providing general insurance or guarantees against loss, damage, or risk, immediately before and on 1 July 1993; and
(b) the company, as insurer, enters into an insurance contract for the general insurance in the course of carrying on the business outside New Zealand; and
(c) the contract covers a period of risk starting before 1 July 1993 and ending after 1 July 1993.
No deduction (with exception)
(2) The company is denied a deduction for an amount payable under the contract unless the event giving rise to the payment occurs on or after 1 July 1993.
Link with subpart DA
(3) This section overrides the general permission.
Defined in this Act: amount, business, company, deduction, general insurance, general permission, insurance contract, New Zealand, pay,
Compare: 2004 No 35 s DZ 10
DZ 11 Film reimbursement scheme on or before 30 June 2001
-
Film reimbursement scheme
(1) Section DS 3 (Clawback of deductions for film reimbursement schemes) does not apply to a deduction for expenditure that relates to a film and is incurred by a person (person A) under a film reimbursement scheme if—
(a) the scheme is entered into on or before 30 June 2001; and
-
(b) the film has, under section EJ 6 (Certification of New Zealand films),—
(i) a final certificate that it is a New Zealand film; or
(ii) a provisional certificate, not obtained by the provision of materially incorrect information to the New Zealand Film Commission, that it is a New Zealand film; and
(c) the film had not been completed before 7 July 1999; and
-
(d) before 7 July 1999,—
(i) 1 or more contracts had been entered into for the supply of goods or services in New Zealand in relation to the film; and
(ii) at least $1,000,000 of expenditure had been incurred under the contract or contracts; and
(e) on or before 1 November 1999, a person who entered into a contract referred to in paragraph (d)(i) gave notice to the Commissioner that the requirements of paragraphs (c) and (d) were met; and
(f) the expenditure for which persons are allowed a deduction under section DS 1 (Acquiring film rights) or DS 2 (Film production expenditure) is no more than 140% of the physical cost of production of the film; and
-
(g) without limiting the application of section BG 1 (Tax avoidance), on the date the film reimbursement scheme is entered into, there is an expectation based on reasonable commercial assumptions that the income to be derived by person A as a result of the expenditure will be at least equal to the sum of—
(i) all expenditure incurred by person A under the scheme; and
(ii) a return on each amount of expenditure that is equivalent to the return on 5 year government stock measured on the date that the scheme is entered into; and
(h) if the expenditure is incurred on depreciable intangible property of a kind listed in schedule 14 (Depreciable intangible property), the expenditure is an amount paid to person B in the circumstances described in subsection (2).
Circumstances for purposes of subsection (1)(h)
(2) For the purposes of subsection (1)(h), the circumstances are that—
(a) the amount paid is income of person B; or
-
(b) at all times in the tax year in which the payment is made, person B—
(i) is resident in a country or territory specified in schedule 24, part A (International tax rules: grey list countries); and
(ii) is liable to income tax in that country or territory by reason of domicile, residence, place of incorporation, or place of management in that country or territory; and
(iii) has calculated its income that is liable to income tax in that country or territory without applying a feature of the taxation law of the country or territory specified in schedule 24, part B.
Some definitions
(3) In this section,—
government stock means stock issued under Part 6 of the Public Finance Act 1989
physical cost of production means the expenditure incurred in producing a film, whether incurred in New Zealand or elsewhere, other than expenditure incurred—
(a) in marketing or selling the film; and
(b) on depreciable intangible property of a kind listed in schedule 14.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: amount, Commissioner, completed, deduction, depreciable intangible property, film, film reimbursement scheme, general permission, government stock, income, income tax, New Zealand, notice, pay, physical cost of production, tax year, year,
Compare: 2004 No 35 s DZ 11
DZ 12 Mineral mining: 1954–2005
-
Section CU 4(1)(b)(ii)
(1) For the purposes of section CU 4(1)(b)(ii) (Compensation for lost, destroyed, or damaged assets),—
-
(a) for a mining company, the deduction is under—
(i) section 153F of the Land and Income Tax Act 1954; or
(ii) section 27 of the Land and Income Tax Amendment Act 1971; or
(iii) section 216 of the Income Tax Act 1976; or
(iv) section DN 1(5) of the Income Tax Act 1994; or
(v) section DU 1(1) or (3) of the Income Tax Act 2004; and
-
(b) for a resident mining operator or a non-resident mining operator, the deduction is under—
(i) section 153J of the Land and Income Tax Act 1954; or
(ii) section 31 of the Land and Income Tax Amendment Act (No 2) 1972; or
(iii) section 216 of the Income Tax Act 1976; or
(iv) section DN 1(5) of the Income Tax Act 1994; or
(v) section DU 1(1) or (3) of the Income Tax Act 2004.
Sections CU 11(1)(a)(ii) and DU 6(1)(a)(ii)
(2) For the purposes of sections CU 11(1)(a)(ii) (Meaning of asset for sections CU 3 to CU 10) and DU 6(1)(a)(ii) (Depreciation),—
(a) for a mining company, the expenditure is that referred to in section 27(3)(a) of the Land and Income Tax Amendment Act 1971; and
-
(b) for a resident mining operator or a non-resident mining operator,—
(i) the expenditure, for section CU 11(1)(a)(ii), is that referred to in paragraph (i) of item
“a”
of the formula in section 31(3) of the Land and Income Tax Amendment Act (No 2) 1972; and
(ii) the asset, for section DU 6(1)(a)(ii), is that referred to in paragraph (i) of item
“a”
of the formula in section 31(3) of the Land and Income Tax Amendment Act (No 2) 1972.
Section DU 12
(3) This subsection applies if section DU 12 (Amount written off by holding company) would have applied to a loan by a company to another company made on or before 31 March 1979 if the Income Tax Amendment Act 1979 had not been enacted. The section applies, as far as applicable, to such a loan as if section 45 of the Income Tax Amendment Act 1979 were the only provision of it that had been enacted.
Section DU 12(5)
(4) For the purposes of section DU 12(5), if the holding company that made the loan was a mining holding company and made the loan wholly or partly out of payments that it received and for which any person was allowed a deduction under section 159 of the Income Tax Act 1976, the part of the amount calculated under section DU 12(3) that arises from those payments is reduced by one-third.
Defined in this Act: company, deduction, holding company, mining company, mining holding company, non-resident mining operator, pay, resident mining operator,
Compare: 2004 No 35 s DZ 12
-
DZ 13 Enhancements to land unamortised at end of 2004–05 year
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When this section applies
(1) This section applies when—
(a) a person is allowed a deduction under section DO 4(1) of the Income Tax Act 1994, of an amount set out in section DO 4(3)(a) or (c) of that Act, for expenditure incurred in carrying on a farming or agricultural business on land in New Zealand; and
(b) at the end of the 2004–05 income year, part of the expenditure (the unamortised balance) remains to be allowed as a deduction in later income years.
Deduction
(2) The person is allowed a deduction for the unamortised balance of expenditure in the income year in which the expenditure is of benefit to the business.
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income year, supplement,
Compare: 2004 No 35 s DZ 13
DZ 14 Deductions under specified leases
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When this section applies
(1) This section applies for the purposes of sections FZ 2 and FZ 4 (which relate to specified leases).
Lessor
(2) In an income year in which a lessor leases a personal property lease asset to a lessee under a specified lease, the lessor is denied a deduction for an amount of depreciation loss for the asset.
Lessee
(3) A lessee under a specified lease is denied a deduction for expenditure incurred by them under the lease except to the extent to which the expenditure—
(a) would be allowed as a deduction to the lessee under section BD 2 (Deductions); and
(b) is no more than the sum of the amounts calculated under section FZ 3(2)(a) (Income of lessor under specified lease) for the initial period, if any, and each instalment period that ends in the income year.
Link with subpart DA
(4) This section overrides the general permission.
Defined in this Act: amount, deduction, depreciation loss, general permission, income year, initial period, instalment period, lessee, lessor, personal property lease asset, specified lease,
Compare: 2004 No 35 ss FC 6(4), FC 8
DZ 15 Patent applications before 1 April 2005
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When this section applies
(1) This section applies when—
(a) a patent is granted to a person in their 2005–06 income year or a later income year; and
(b) the patent is granted in relation to a patent application owned by the person; and
(c) the patent application, with a complete specification, was first lodged with the Intellectual Property Office of New Zealand or a similar office in another jurisdiction before 1 April 2005; and
(d) a deduction for expenditure on the patent application is denied under another provision.
Calculation of deduction
(2) The person is allowed, in the income year in which the patent is granted, a deduction for expenditure on the patent application in any income year, calculated using the formula—
Definition of items in formula
(3) In the formula,—
(a) months of ownership is the number of whole calendar months for which the person owns the patent application:
(b) cost is the cost to the person of the patent application.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, income year,
Compare: 2004 No 35 s DZ 14
DZ 16 Geothermal wells between 31 March 2003 and 17 May 2006
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When this section applies
(1) This section applies to a person’s geothermal well when—
(a) the well’s geothermal energy proving period ends between 31 March 2003 and 17 May 2006; and
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(b) the well is—
(i) both started and completed between 31 March 2003 and 17 May 2006:
(ii) acquired between 31 March 2003 and 17 May 2006; and
(c) a deduction for expenditure on the well is denied under another provision.
Deduction
(2) In the income year in which the well’s geothermal energy proving period ends, the person is allowed a deduction for expenditure incurred on the well.
Link with subpart DA
(3) This section supplements the general permission and overrides the capital limitation. The other general limitations still apply.
Defined in this Act: capital limitation, deduction, general limitation, general permission, geothermal energy proving period, geothermal well, income year, supplement,
Compare: 2004 No 35 s DZ 15
DZ 17 Expenditure on improvements to aquacultural business before 1995–96 income year
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When this section applies
(1) This section applies in an income year when a person incurs expenditure—
(a) before the 1995–96 income year in making an improvement for the purposes of an aquacultural business; and
(b) for which they would be allowed under section DO 12 (Improvements to aquacultural business) a deduction in the income year if the expenditure had been incurred in the 1995–96 income year or a later income year.
Deduction
(2) The person is allowed a deduction in the income year of an amount calculated using the formula—
125% × schedule percentage × diminished value.
Definition of items in formula
(3) In the formula,—
(a) schedule percentage is the percentage set out opposite the description of the improvement in schedule 20, parts B to F, column 2 (Expenditure on farming, horticultural, aquacultural, and forestry improvements):
(b) diminished value is the diminished value of the improvement.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, business, capital limitation, deduction, diminished value, general limitation, general permission, income year,
Compare: 2004 No 35 s DZ 16
DZ 18 Expenditure on improvements to forestry land before 1995–96 income year
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When this section applies
(1) This section applies in an income year when a person incurs expenditure—
(a) before the 1995–96 income year in making an improvement on land; and
(b) for which they would be allowed under section DP 3 (Improvements to forestry land) a deduction in the income year if the expenditure had been incurred in the 1995–96 income year or a later income year.
Deduction
(2) The person is allowed a deduction in the income year of an amount calculated using the formula—
125% × schedule percentage × diminished value.
Definition of items in formula
(3) In the formula,—
(a) schedule percentage is the percentage set out opposite the description of the improvement in schedule 20, part G, column 2 (Expenditure on farming, horticultural, aquacultural, and forestry improvements):
(b) diminished value is the diminished value of the improvement.
Link with subpart DA
(4) This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.
Defined in this Act: amount, capital limitation, deduction, diminished value, general limitation, general permission, income year, land,
Compare: 2004 No 35 s DZ 17
Legislative history | |
|---|---|
| 15 November 2006 | Introduction (Bill 92-1) |
| 23 November 2006 | First reading and referral to Finance and Expenditure Committee |
| 16 July 2007 | Reported from Finance and Expenditure Committee (Bill 91-2) |
| 16 August 2007 | Second reading |
| 21 August 2007 | Committee of the whole House |
| 25 October 2007 | Third reading |
| 1 November 2007 | Royal assent |
This Act is administered by the Inland Revenue Department.
Versions
Income Tax Act 2007
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