Income Tax Act 2007

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Pollution control

DB 46 Avoiding, remedying, or mitigating effects of discharge of contaminant
  • 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, in either part A or 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—

    100%
    assumed life.
    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

    Section DB 46(1)(b)(i): amended (with effect on 1 April 2008), on 21 December 2010 (applying for the 2008–09 and later income years), by section 38(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).