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Income Tax Act 2007
Income Tax Act 2007
Income Tax Act 2007
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Part E Timing and quantifying rules
Subpart EA—Matching rules: revenue account property, prepayments, and deferred payments
Contents
EA 1 Trading stock, livestock, and excepted financial arrangements
Property subject to matching rules
(1)
The matching rules described in this section apply to each of the following kinds of property:
(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).
Application of section CH 1
(2)
When a person has any of those kinds of property at the end of an income year, its value is income of the person in the income year under section CH 1 (Adjustment for closing values of trading stock, livestock, and excepted financial arrangements).
Application of section DB 49
(3)
When a person has any of those kinds of property at the start of an income year, they are allowed a deduction for its value in the income year under section DB 49 (Adjustment for opening values of trading stock, livestock, and excepted financial arrangements).
Determination of values
(4)
The values are determined under—
(a)
section EB 3 (Valuation of trading stock); and
(b)
section EC 2 (Valuation of livestock); and
(c)
section ED 1 (Valuation of excepted financial arrangements).
Defined in this Act: deduction, excepted financial arrangement, income, income year, original share, pay, revenue account property, share-lending right, share supplier, trading stock
Compare: 2004 No 35 s EA 1
EA 2 Other revenue account property
When this section applies
(1)
This section applies to revenue account property that is not—
(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)
an excepted financial arrangement valued under subpart ED (Valuation of excepted financial arrangements):
(d)
a film or a film right to which sections EJ 4 to EJ 8 (which relate to films) apply:
(e)
property under a specified lease or a lease to which section EJ 10 (Personal property lease payments) applies:
(f)
property that arises as a result of petroleum development expenditure or petroleum exploration expenditure to which sections DT 1, DT 5, and EJ 12 to EJ 20 (which relate to petroleum mining) apply:
(fb)
property that arises as a result of mining development expenditure or mining exploration expenditure to which sections EJ 20B to EJ 20E (which relate to mineral mining) apply:
(fc)
property fitted to an aircraft engine as part of an aircraft engine overhaul to which section DW 5 (Aircraft operators: aircraft engines and aircraft engine overhauls) applies:
(g)
a financial arrangement valued under subpart EW (Financial arrangements rules).
Timing of deduction
(2)
A deduction for the cost of revenue account property of a person is allocated to the earlier of—
(a)
the income year in which the person disposes of the property; and
(b)
the income year in which the property ceases to exist.
Defined in this Act: aircraft engine, aircraft engine overhaul, deduction, excepted financial arrangement, film, film right, financial arrangement, income year, lease, pay, petroleum development expenditure, petroleum exploration expenditure, revenue account property, specified lease, trading stock
Compare: 2004 No 35 s EA 2
Section EA 2(1)(e): replaced, on 29 March 2018 (with effect on 1 April 2008), by section 64(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section EA 2(1)(f): amended, on 29 March 2018 (with effect on 1 April 2008), by section 64(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section EA 2(1)(fb): inserted, on 1 April 2014, by section 45 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section EA 2(1)(fc): inserted, on 1 April 2017, by section 54(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EA 2 list of defined terms aircraft engine: inserted, on 1 April 2017, by section 54(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EA 2 list of defined terms aircraft engine overhaul: inserted, on 1 April 2017, by section 54(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
EA 3 Prepayments
When this section applies
(1)
This section applies when—
(a)
a person has been allowed a deduction for expenditure under this Act or an earlier Act; and
(b)
the expenditure was not incurred on the items described in subsection (2); and
(c)
some or all of the expenditure is unexpired under subsections (4) to (7) at the end of the person’s income year.
Exclusions
(2)
This section does not apply to expenditure incurred on—
(a)
revenue account property to which section EA 2 applies:
(b)
trading stock valued under subpart EB (Valuation of trading stock (including dealer’s livestock)):
(c)
livestock valued under subpart EC (Valuation of livestock):
(d)
an excepted financial arrangement valued under subpart ED (Valuation of excepted financial arrangements):
(db)
a leasehold estate, or licence to use land, to which section EI 4B (Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence) applies:
(e)
a film or a film right to which sections EJ 4 to EJ 8 (which relate to films) apply:
(f)
a specified lease or a lease to which section EJ 10 (Personal property lease payments) applies:
(g)
property that arises as a result of petroleum development expenditure or petroleum exploration expenditure to which sections EJ 12 to EJ 20 (which relate to petroleum mining) apply:
(gb)
property that arises as a result of mining development expenditure or mining exploration expenditure to which sections EJ 20B to EJ 20E (which relate to mineral mining) apply:
(h)
a financial arrangement valued under subpart EW (Financial arrangements rules).
Unexpired portion
(3)
The unexpired portion of a person’s expenditure at the end of an income year—
(a)
is income of the person in the income year under section CH 2 (Adjustment for prepayments); and
(b)
is an amount for which the person is allowed a deduction in the following income year under section DB 50 (Adjustment for prepayments), if subsection (4B) does not apply.
Unexpired portion: expenditure on goods
(4)
An amount of expenditure on goods is unexpired at the end of an income year if, by the end of the income year,—
(a)
the person has not used up the goods in deriving income; and
(b)
the goods are not destroyed or rendered useless for the purpose of deriving income.
Expenditure on goods used in aircraft engine overhaul
(4B)
The unexpired portion of expenditure on pieces that are fitted to an aircraft engine as part of an aircraft engine overhaul is treated as being expenditure incurred in carrying out the aircraft engine overhaul for the purposes of sections DW 5 and DW 6 (which relate to the acquisition, overhaul, and leasing of aircraft engines).
Unexpired portion: expenditure on services
(5)
An amount of expenditure on services is unexpired at the end of an income year if the services have not been performed by the end of the income year.
Unexpired portion: expenditure on choses in action
(6)
An amount of expenditure on a chose in action is unexpired at the end of an income year if the amount relates to a period of enforceability of the chose in action falling after the income year.
Allowances reimbursing employees
(7)
In the case of expenditure subject to sections CW 16B to CW 16F, CW 17, CW 17B, CW 17C, CW 17CB, CW 17CC, and CW 18 (which relate to expenditure, reimbursement, and allowances of employees), this section applies on the basis that the relevant services were performed in the income year in which the employee’s expenditure is expected to occur.
Commissioner’s discretionary relief
(8)
The Commissioner may excuse a person from complying with this section under section 91AAC of the Tax Administration Act 1994.
Defined in this Act: aircraft engine, aircraft engine overhaul, amount, Commissioner, deduction, employee, film, film right, goods, income, income year, land, leasehold estate, pay, revenue account property, services
Compare: 2004 No 35 s EA 3
Section EA 3(2)(db): inserted (with effect on 1 April 2013), on 17 July 2013, by section 38(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EA 3(2)(gb): inserted, on 1 April 2014, by section 46 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section EA 3(3)(b): amended, on 1 April 2017, by section 55(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EA 3(4B) heading: inserted, on 1 April 2017, by section 55(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EA 3(4B): inserted, on 1 April 2017, by section 55(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EA 3(7): amended, on 1 April 2015, by section 64 of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EA 3(7): amended (with effect on 1 April 2008), on 6 October 2009, by section 111 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EA 3 list of defined terms aircraft engine: inserted, on 1 April 2017, by section 55(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EA 3 list of defined terms aircraft engine overhaul: inserted, on 1 April 2017, by section 55(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EA 3 list of defined terms land: inserted (with effect on 1 April 2013), on 17 July 2013, by section 38(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EA 3 list of defined terms leasehold estate: inserted (with effect on 1 April 2013), on 17 July 2013, by section 38(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
EA 4 Deferred payment of employment income
When this section applies
(1)
This section applies when—
(a)
a person is allowed a deduction in an income year for an amount of expenditure on employment income; and
(b)
the person has not paid the amount at the end of—
(i)
the 63rd day after the end of the income year; or
(ib)
the income year, if they choose, in a return of income, to not use paragraph (i) or (ii); or
(ii)
the period described in subsection (3), for employment income paid to a shareholder-employee.
Unpaid amount
(2)
The unpaid amount is—
(a)
income of the person in the income year under section CH 3 (Adjustment for deferred payment of employment income); and
(b)
an amount for which the person is allowed a deduction in the following income year under section DB 51 (Adjustment for deferred payment of employment income).
Extension of payment period for shareholder-employee
(3)
For employment income paid to a shareholder-employee, the 63 day period for payment in subsection (1)(b)(i) is extended until the last date by which the person could file a return of income for the income year if the time for filing were extended to its maximum under section 37(5) of the Tax Administration Act 1994.
Disposal of business: obligations transferred to non-associates
(4)
For the purposes of this section, a person (the seller) who disposes of a business, or a part of a business, to another person (the buyer) is treated as paying, at the time of the disposal, an amount of employment income of an employee working in the business if—
(a)
the seller and the buyer are not associated persons at the time of the disposal; and
(b)
the seller has incurred the obligation to pay the amount in the course of their business, whether or not it remains a contingent obligation at the time of the disposal; and
(c)
the employee becomes an employee of the buyer under the disposal arrangements; and
(d)
the seller and the buyer agree in writing, under the disposal arrangements, that—
(i)
the buyer assumes the obligation to pay an amount of employment income to the employee; and
(ii)
the consideration payable by the buyer for the business, or the part of the business, reflects the buyer’s assumption of the seller’s provision for the obligation.
Disposal of business: obligations transferred to associates
(5)
If subsection (4) would have applied but for the fact that the seller and the buyer are associated at the time of the disposal,—
(a)
the amount of employment income is not treated as income of the seller in any income year following the disposal, despite subsection (2)(a) and section CH 3; and
(b)
the seller is denied a deduction for the amount of employment income in any income year following the disposal, despite subsection (2)(b) and section DB 51; and
(c)
the buyer may be allowed a deduction under section DC 10(3) (Disposal of business: transferred employment income obligations).
No disposal: obligations transferred to associates
(6)
If section DC 11 (Transfers of employment income obligations to associates) applies,—
(a)
the amount of employment income is not treated as income of the transferor (person A) in any income year following the disposal, despite subsection (2)(a) and section CH 3; and
(b)
the transferor is denied a deduction for the amount of employment income in any income year following the disposal, despite subsection (2)(b) and section DB 51; and
(c)
the transferee (person B) may be allowed a deduction under section DC 11.
Accounting treatment of transferred obligations
(7)
For the purposes of this section, the buyer of a business, or a part of a business, who assumes at the time of the disposal an obligation to pay an amount of employment income—
(a)
may account for the amount in a way that treats the relevant employee individually or treats the buyer’s employees as a group; and
(b)
must account for the amount in the same way in each relevant income year.
Defined in this Act: amount, arrangement, associated person, business, deduction, employee, employment income, income, income year, pay, return of income, shareholder-employee, time of the disposal
Compare: 2004 No 35 s EA 4
Section EA 4(1)(b)(ib): inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 79(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
Section EA 4(4) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(4): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(4)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(4)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(4)(c): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(4)(d): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(5) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(5): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(5)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(5)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(5)(c): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(6) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(6)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(6)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4(7): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4 list of defined terms time of the disposal: inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EA 4 list of defined terms time of the sale: repealed (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Subpart EB—Valuation of trading stock (including dealer’s livestock)
Contents
Introductory provisions
EB 1 When this subpart applies
This subpart applies when a person who owns or carries on a business has trading stock for the purpose of selling or exchanging it in the ordinary course of the business.
Defined in this Act: business, trading stock
Compare: 2004 No 35 s EB 1
EB 2 Meaning of trading stock
Meaning
(1)
Trading stock means property that a person who owns or carries on a business has for the purpose of selling or exchanging in the ordinary course of the business.
Inclusions
(2)
Trading stock includes—
(a)
work of the following kinds that would be trading stock under subsection (1) if it were completed:
(i)
partly completed work:
(ii)
work in progress:
(b)
materials that the person has for use in producing trading stock:
(c)
property on which the person has incurred expenditure, when the property would, if they had it, be trading stock under subsection (1) or paragraph (a) or (b):
(d)
property leased under a hire purchase agreement when the property—
(i)
is treated as having been acquired by the lessor under section FA 15 (Treatment when agreement ends: seller acquiring property); and
(ii)
is an asset of a business that the lessor carries on.
Exclusions
(3)
Trading stock does not include—
(a)
land:
(b)
depreciable property:
(c)
a financial arrangement to which the financial arrangements rules or the old financial arrangements rules apply:
(d)
an excepted financial arrangement that a life insurer has:
(e)
an excepted financial arrangement held by a person if section CX 55 (Proceeds from disposal of investment shares) applies to the income of the person from a disposal of the excepted financial arrangement:
(f)
livestock not used in a dealing business:
(g)
consumable aids to be used in the process of producing trading stock:
(h)
a spare part not held for sale or exchange:
(i)
an emissions unit:
(j)
a greenhouse gas unit that is not an emissions unit.
Defined in this Act: business, depreciable property, emissions unit, excepted financial arrangement, financial arrangement, greenhouse gas unit, hire purchase agreement, income, land, lessor, life insurer, trading stock
Compare: 2004 No 35 s EB 2
Section EB 2(3)(e): amended, on 1 April 2010, by section 112(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EB 2(3)(h): amended, on 26 September 2008, by section 72(1) of the Climate Change Response (Emissions Trading) Amendment Act 2008 (2008 No 85).
Section EB 2(3)(i): substituted (with effect on 1 January 2009), on 6 October 2009, by section 112(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EB 2(3)(j): replaced, on 30 November 2020, by section 280 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).
Section EB 2 list of defined terms emissions unit: inserted (with effect on 1 January 2009), on 6 October 2009, by section 112(3)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EB 2 list of defined terms ETS unit: repealed (with effect on 1 January 2009), on 6 October 2009, by section 112(3)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EB 2 list of defined terms greenhouse gas unit: inserted, on 30 November 2020, by section 280 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).
Section EB 2 list of defined terms non-Kyoto greenhouse gas unit: repealed, on 30 November 2020, by section 280 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).
EB 3 Valuation of trading stock
Valuation method
(1)
A person who carries on a business must determine the value of their trading stock at the end of each income year by a method that is available under this subpart for them to use.
Use of value
(2)
The value determined under subsection (1) is—
(a)
the closing value of the trading stock for the income year for the purposes of section CH 1 (Adjustment for closing values of trading stock, livestock, and excepted financial arrangements); and
(b)
the opening value of the trading stock for the next income year for the purposes of section DB 49 (Adjustment for opening values of trading stock, livestock, and excepted financial arrangements).
Excepted financial arrangements valued at cost
(3)
Despite anything in this subpart, the value of any trading stock that is an excepted financial arrangement must be determined under subpart ED (Valuation of excepted financial arrangements).
Defined in this Act: business, excepted financial arrangement, income year, trading stock
Compare: 2004 No 35 s EB 3
EB 4 Trading stock valuation methods
Standard valuation
(1)
The standard valuation methods for trading stock are—
(a)
cost:
(b)
discounted selling price:
(c)
replacement price:
(d)
market selling value.
Low-turnover valuation
(2)
A person who is a low-turnover trader may value closing stock by a method described in section EB 14.
Low value trading stock
(3)
In certain circumstances, a person may value closing stock under section EB 23.
Defined in this Act: closing stock, cost, low-turnover trader, trading stock
Compare: 2004 No 35 s EB 4
EB 5 Transfers of trading stock within wholly-owned groups
When this section applies
(1)
This section applies in an income year to trading stock held by a company that is part of a wholly-owned group of companies, when—
(a)
a group company (company A) originally acquires and holds the trading stock; and
(b)
from the time it is acquired to the end of the income year, the trading stock is held within the group by a company or companies that are resident in New Zealand; and
(c)
through transfers within the group, another group company (company B) holds the trading stock at the end of the income year; and
(d)
company A and company B remain part of the group at the end of the income year; and
(e)
either—
(i)
the income years of company A and company B end on the same date; or
(ii)
they end on different dates, and the Commissioner has approved both dates as corresponding to the end of a business cycle and as necessary to avoid material distortion of net income that would occur if the income years ended on the same date.
Choice of treatment
(2)
Company B may choose to value the closing stock at the cost of the trading stock to company A.
When company stops being part of group
(3)
If the companies stop being part of the same wholly-owned group, company B is treated as disposing of and reacquiring the trading stock for its market value at the time. If the market value of the trading stock cannot be determined separately from other property, its market value at the time company B acquired it is treated as its value.
Defined in this Act: business, closing stock, Commissioner, company, cost, income year, market value, net income, resident in New Zealand, trading stock, wholly-owned group of companies
Compare: 2004 No 35 s EB 5
Standard valuation
EB 6 Cost
Valuation at cost
(1)
A person may determine the value of their closing stock at cost. If the person chooses this method, they must include and allocate costs under generally accepted accounting practice or as described in subsection (1B)(b).
Valuation at cost: agricultural produce
(1B)
Despite subsection (1), a person who uses NZIAS 41 for their trading stock in their financial statements must—
(a)
value their closing stock at cost; and
(b)
include and allocate costs so that the value of their closing stock is not materially different from the value of the closing stock obtained by applying NZIAS 2, ignoring paragraph 20 of NZIAS 2.
Whether valuation correct
(2)
For the purposes of subsection (1), the person has not complied with generally accepted accounting practice if the value of closing stock is materially different from the value obtained by applying, to the closing stock, NZIAS 2 or an equivalent standard issued in its place.
Definition
(3)
In this section, NZIAS 41 means New Zealand Equivalent to International Accounting Standard 41, in effect under the Financial Reporting Act 2013 as amended from time to time, or an equivalent standard issued in its place.
Defined in this Act: closing stock, cost, generally accepted accounting practice, NZIAS 2, NZIAS 41
Compare: 2004 No 35 s EB 6
Section EB 6(1): amended, on 1 April 2008, by section 349(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 6(1B) heading: inserted, on 1 April 2008, by section 349(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 6(1B): inserted, on 1 April 2008, by section 349(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 6(2): amended, on 1 April 2008, by section 349(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 6(3) heading: inserted, on 1 April 2008, by section 349(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 6(3): inserted, on 1 April 2008, by section 349(4) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 6(3): amended, on 1 April 2014, by section 126 of the Financial Reporting (Amendments to Other Enactments) Act 2013 (2013 No 102).
Section EB 6 list of defined terms NZIAS 2: inserted, on 1 April 2008, by section 349(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 6 list of defined terms NZIAS 41: inserted, on 1 April 2008, by section 349(5) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
EB 7 Cost allocation: cost-flow method
When this section applies: first case
(1)
This section applies when a person who determines the value of their closing stock at cost has items of trading stock that are not separately identifiable.
Compulsory use of cost-flow method
(2)
The person must use 1 of the cost-flow methods described in subsection (5) to identify the items of trading stock included in closing stock and to determine the cost of the items.
When this section applies: second case
(3)
This section also applies when a person who determines the value of their closing stock at cost has items of trading stock that are separately identifiable.
Discretionary use of cost-flow method
(4)
The person may use 1 of the cost-flow methods described in subsection (5) to determine the cost of the items of trading stock.
Cost-flow methods
(5)
The cost-flow methods of allocating costs are—
(a)
the first-in first-out cost method; and
(b)
the weighted average cost method.
Consistent use
(6)
A person who determines the value of their closing stock at cost must use the same cost-flow method of allocating costs as they use in their financial statements for the income year.
Defined in this Act: closing stock, cost, financial statements, income year, trading stock
Compare: 2004 No 35 s EB 7
EB 8 Cost allocation: budgeted method or standard cost method
When this section applies
(1)
This section applies when a person—
(a)
has a business of manufacturing or producing trading stock; and
(b)
determines the value of their closing stock at cost; and
(c)
allocates costs by—
(i)
a budgeted method; or
(ii)
a standard cost method; and
(d)
is not a low-turnover trader to whom section EB 17(3) applies.
Apportionment of difference required
(2)
If any difference arises between the estimated costs of production included in the financial statements of the business for the income year and the actual costs of production, the person must apportion the difference between the cost of trading stock sold or exchanged during the income year and the closing stock.
Defined in this Act: business, closing stock, cost, financial statements, income year, low-turnover trader, trading stock
Compare: 2004 No 35 s EB 8
Section EB 8(2): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EB 9 Discounted selling price
Valuation at discounted selling price
(1)
A person may determine the value of their closing stock at its discounted selling price if they use discounted selling price for their trading stock in their financial statements.
Retailers
(2)
If the person is a retailer, the discounted selling price for each department or category of goods is the total of the retail selling prices of the goods minus the normal gross profit margin for the department or category of goods. This subsection is overridden by subsection (4).
Normal gross profit margin for purposes of subsection (2)
(3)
For the purposes of subsection (2), the person must—
(a)
calculate the normal gross profit margin for the department or category of goods under NZIAS 2 or an equivalent standard issued in its place; and
(b)
calculate the normal gross profit margin for each income year for each department or category of goods; and
(c)
include all costs that sections EB 6 to EB 8 require to be included.
Retailers with turnover of $1,000,000 or less
(4)
A trader who is a retailer whose turnover is $1,000,000 or less may determine the discounted selling price of all closing stock valued under this method in an income year by discounting the total of the retail selling prices of the stock by the average gross profit margin for all closing stock valued under this method in the income year.
Increase in specified sum
(5)
The Governor-General may make an Order in Council increasing the sum specified in subsection (4).
Secondary legislation
(5B)
An Order in Council under subsection (5) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Not retailers
(6)
If the person is not a retailer, the discounted selling price for each category of goods is the total market selling value of the goods minus the normal gross profit margin for the category of goods.
Normal gross profit margin for purposes of subsection (6)
(7)
For the purposes of subsection (6), the person must—
(a)
calculate the normal gross profit margin for each income year for each category of goods; and
(b)
include all costs that sections EB 6 to EB 8 require to be included.
Defined in this Act: closing stock, cost, financial statements, income year, NZIAS 2, trading stock, turnover
Compare: 2004 No 35 s EB 9
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | PCO must publish it on the legislation website and notify it in the Gazette | LA19 s 69(1)(c) | ||
| Presentation | The Minister must present it to the House of Representatives | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
Section EB 9(3)(a): amended, on 1 April 2008, by section 350(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 9(5B) heading: inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Section EB 9(5B): inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Section EB 9 list of defined terms NZIAS 2: inserted, on 1 April 2008, by section 350(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
EB 10 Replacement price
Valuation at replacement price
(1)
A person may determine the value of their closing stock at its replacement price if they use replacement price for their trading stock in their financial statements.
Establishing replacement price
(2)
The replacement price—
(a)
is—
(i)
the market value of the trading stock on the last day of the income year; or
(ii)
if there is no such market value, the last price that the person paid during the income year to acquire equivalent trading stock; and
(b)
does not include an amount of input tax for the supply of the replacement trading stock to the person.
Defined in this Act: closing stock, financial statements, income year, input tax, trading stock
Compare: 2004 No 35 s EB 10
EB 11 Market selling value
Valuation at market selling value
(1)
A person may determine the value of their closing stock at its market selling value if the market selling value is less than the cost of the stock.
Establishing market selling value
(2)
The market selling value of closing stock is found by taking the amount that the person would normally expect to receive in the ordinary course of business from the sale of the trading stock and subtracting the following costs:
(a)
the estimated costs of completion; and
(b)
the expected costs of selling it.
Expected costs of selling
(3)
For the purposes of subsection (2)(b), the expected costs of selling the stock are the costs that the person usually incurs for the following:
(a)
transport:
(b)
insurance:
(c)
sales commissions:
(d)
discounts to buyers.
Expected costs of selling: financial statements
(4)
For the purposes of subsection (3), if the person prepares financial statements, the costs must have been taken into account in the statements in calculating net realisable value.
Substantiating market selling value
(5)
If the person uses market selling value to value closing stock, they must be able to substantiate that value. If they cannot, they must use 1 of the following to value their closing stock:
(a)
cost, as described in sections EB 6 to EB 8 or EB 15 to EB 18; or
(b)
discounted selling price, as described in section EB 9 or EB 19; or
(c)
replacement price, as described in section EB 10 or EB 20.
Defined in this Act: amount, business, closing stock, cost, financial statements, trading stock
Compare: 2004 No 35 s EB 11
EB 12 Valuing closing stock consistently
In determining the value of closing stock at cost, discounted selling price, or replacement price, a person must comply with the consistency and disclosure requirements of NZIAS 8 or an equivalent standard issued in its place.
Defined in this Act: closing stock, cost, NZIAS 8
Compare: 2004 No 35 s EB 12
Section EB 12: amended, on 1 April 2008, by section 351(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 12 list of defined terms NZIAS 8: inserted, on 1 April 2008, by section 351(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Low-turnover valuation
EB 13 Low-turnover valuation
Options
(1)
A person who is a low-turnover trader may value closing stock—
(a)
by a standard valuation method, as described in sections EB 6 to EB 12; or
(b)
by a low-turnover valuation method, as described in sections EB 14 to EB 22; or
(c)
as low value trading stock, in the circumstances described in section EB 23.
Meaning of low-turnover trader
(2)
In this subpart, low-turnover trader means a person who carries on a business when, in an income year, the total of the turnover of the business and the turnover of associated persons, as defined in sections YB 2 and YB 3 (which contain definitions of associated persons), is no more than the greater of—
(a)
$3,000,000; and
(b)
the sum specified by the Governor-General by Order in Council.
Increase in specified sum
(3)
The Governor-General may make an Order in Council increasing the sum specified in subsection (2)(a).
Secondary legislation
(4)
An Order in Council under this section is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: associated person, business, closing stock, income year, low-turnover trader, turnover
Compare: 2004 No 35 s EB 13
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | PCO must publish it on the legislation website and notify it in the Gazette | LA19 s 69(1)(c) | ||
| Presentation | The Minister must present it to the House of Representatives | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
Section EB 13(2): amended, on 1 April 2010 (applying for the 2010–11 and later income years), by section 113(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EB 13(4) heading: inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Section EB 13(4): inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
EB 14 Low-turnover valuation methods
The low-turnover valuation methods are—
(a)
cost for low-turnover traders; and
(b)
discounted selling price for low-turnover traders; and
(c)
replacement price for low-turnover traders; and
(d)
market selling value for low-turnover traders.
Defined in this Act: cost, low-turnover trader
Compare: 2004 No 35 s EB 14
EB 15 Cost for low-turnover traders
A low-turnover trader may determine the value of their closing stock at cost. If the low-turnover trader chooses this method, they must include and allocate costs under—
(a)
generally accepted accounting practice; or
(b)
section EB 16; or
(c)
section EB 17; or
(d)
Defined in this Act: closing stock, cost, generally accepted accounting practice, low-turnover trader
Compare: 2004 No 35 s EB 15
EB 16 Cost allocation: cost-flow method for low-turnover traders
Section EB 7(1) to (5) applies to a low-turnover trader.
Defined in this Act: cost, low-turnover trader
Compare: 2004 No 35 s EB 16
EB 17 Costs: manufactured or produced stock of low-turnover traders
When this section applies
(1)
This section applies when a low-turnover trader—
(a)
has a business of manufacturing or producing trading stock; and
(b)
determines the value of their closing stock at cost.
Costs to be included
(2)
In determining the value of their closing stock, the low-turnover trader must include the following costs of production:
(a)
direct and indirect material costs:
(b)
direct and indirect labour costs:
(c)
utilities costs:
(d)
costs of repairing and maintaining factory plant:
(e)
costs of rent of factory plant:
(f)
amounts of depreciation loss on factory plant:
(g)
costs additional to those described in paragraphs (a) to (f), if—
(i)
they are costs of production; and
(ii)
the low-turnover trader includes them in the financial statements for the income year.
Apportionment of difference not required
(3)
If the low-turnover trader allocates costs by a budgeted method or a standard cost method, and if any difference arises between the estimated costs of production included in the financial statements of the business for the income year and the actual costs of production, the low-turnover trader is not required to apportion the difference between the cost of trading stock sold or exchanged during the income year and the closing stock.
Defined in this Act: amount, business, closing stock, cost, depreciation loss, financial statements, income year, low-turnover trader, trading stock
Compare: 2004 No 35 s EB 17
Section EB 17(3): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EB 18 Costs: other stock of low-turnover traders
When this section applies
(1)
This section applies when a low-turnover trader—
(a)
acquires trading stock other than by manufacture or production; and
(b)
determines the value of their closing stock at cost.
Costs to be included
(2)
In determining the value of their closing stock, the low-turnover trader must include the following costs:
(a)
the acquisition cost; and
(b)
any direct transport and insurance costs that they incur in bringing the stock to the place and condition in which they have it.
Defined in this Act: closing stock, cost, low-turnover trader, trading stock
Compare: 2004 No 35 s EB 18
Section EB 18(2)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EB 19 Discounted selling price for low-turnover traders
Financial statements prepared
(1)
A low-turnover trader who prepares financial statements may determine the value of their closing stock at its discounted selling price if they use discounted selling price for their trading stock in their financial statements.
Financial statements not prepared
(2)
A low-turnover trader who does not prepare financial statements may determine the value of their closing stock at its discounted selling price.
Retailers with turnover of more than $1,000,000
(3)
If the low-turnover trader is a retailer whose turnover is more than $1,000,000, the discounted selling price for each department or category of goods is the total of the retail selling prices of the goods minus the normal gross profit margin for the department or category of goods.
Normal gross profit margin for purposes of subsection (3)
(4)
For the purposes of subsection (3), the low-turnover trader must—
(a)
calculate the normal gross profit margin for the department or category of goods under NZIAS 2 or an equivalent standard issued in its place; and
(b)
calculate the normal gross profit margin for each income year for each department or category of goods; and
(c)
include all costs that sections EB 16 to EB 18 require to be included.
Not retailers
(5)
If the low-turnover trader is not a retailer, the discounted selling price for each category of goods is the total market selling value of the goods minus the normal gross profit margin for the category of goods.
Normal gross profit margin for purposes of subsection (5)
(6)
For the purposes of subsection (5), the low-turnover trader must—
(a)
calculate the normal gross profit margin for each income year for each category of goods; and
(b)
include all costs that sections EB 16 to EB 18 require to be included.
Defined in this Act: closing stock, cost, financial statements, income year, low-turnover trader, NZIAS 2, trading stock, turnover
Compare: 2004 No 35 s EB 19
Section EB 19(4)(a): amended, on 1 April 2008, by section 352(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 19 list of defined terms NZIAS 2: inserted, on 1 April 2008, by section 352(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
EB 20 Replacement price for low-turnover traders
Financial statements prepared
(1)
A low-turnover trader who prepares financial statements may determine the value of their closing stock at its replacement price if they use replacement price for their trading stock in their financial statements.
Financial statements not prepared
(2)
A low-turnover trader who does not prepare financial statements may determine the value of their closing stock at its replacement price.
Establishing replacement price
(3)
The replacement price is—
(a)
the market value of the trading stock on the last day of the income year; or
(b)
the last price that the low-turnover trader paid during the income year to acquire equivalent trading stock.
Defined in this Act: financial statements, income year, low-turnover trader, trading stock
Compare: 2004 No 35 s EB 20
EB 21 Market selling value for low-turnover traders
Valuation at market selling value
(1)
A low-turnover trader may determine the value of their closing stock at its market selling value, whether that value is higher or lower than cost. However, if the value is higher than cost, the trader must be consistent from 1 income year to the next in their use of market selling value to determine the value of closing stock.
Establishing market selling value
(2)
Section EB 11(2) to (4) applies to a low-turnover trader.
Defined in this Act: closing stock, cost, income year, low-turnover trader
Compare: 2004 No 35 s EB 21
EB 22 Valuing closing stock consistently for low-turnover traders
Traders complying with generally accepted accounting practice
(1)
In determining the value of closing stock at cost, discounted selling price, or replacement price, a low-turnover trader who complies with generally accepted accounting practice must comply with the consistency and disclosure requirements of NZIAS 8 or an equivalent standard issued in its place.
Other traders
(2)
A low-turnover trader who does not comply with generally accepted accounting practice must be consistent from 1 income year to the next in—
(a)
their choice of valuing closing stock at cost, discounted selling price, or replacement price; and
(b)
their use of market selling value, if it is greater than cost; and
(c)
their use of a cost-flow method of allocating costs under section EB 7(1) to (5); and
(d)
the extent to which they include indirect costs in the cost of trading stock that they manufacture or produce; and
(e)
their method of calculating discounted selling price.
When changes allowed
(3)
A low-turnover trader to whom subsection (2) applies may make changes in relation to the matters described in the subsection if—
(a)
the change is justified by sound commercial reasons and for this purpose, the advancement, deferral, or reduction of an income tax liability is not a sound commercial reason; or
(b)
the change is required by another provision in this subpart.
Records
(4)
A low-turnover trader who makes a change as described in subsection (3) must keep sufficient details of the change, and the reasons for the change, under section 22 of the Tax Administration Act 1994.
Defined in this Act: closing stock, cost, generally accepted accounting practice, income tax liability, income year, low-turnover trader, NZIAS 8, trading stock
Compare: 2004 No 35 s EB 22
Section EB 22(1): amended, on 1 April 2008, by section 353(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EB 22 list of defined terms NZIAS 8: inserted, on 1 April 2008, by section 353(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Low value trading stock
EB 23 Valuing closing stock under $10,000
When this section applies
(1)
This section applies when a person, including a low-turnover trader,—
(a)
has a turnover of $1,300,000 or less in an income year; and
(b)
reasonably estimates that the value of their closing stock for the income year is less than $10,000.
Closing value
(2)
The person may use the opening value of their trading stock as the value of their closing stock for the income year.
Defined in this Act: closing stock, income year, low-turnover trader, trading stock, turnover
Compare: 2004 No 35 s EB 23
Section EB 23 heading: amended, on 1 April 2009, by section 5(1) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
Section EB 23(1)(b): amended, on 1 April 2009, by section 5(2) of the Taxation (Business Tax Measures) Act 2009 (2009 No 5).
Disposal of business assets
EB 24 Apportionment on disposal of business assets that include trading stock
When this section applies
(1)
This section applies when a person disposes of trading stock together with other assets of a business to another person. This section also applies if a person disposes of an interest in trading stock together with other assets of a business or an interest in those other assets, whether or not the disposal of the partial interest is to another person.
Apportionment
(2)
The total amount received on disposal must be apportioned between the trading stock and the other assets in a way that reflects their respective market values.
Purchase price
(3)
The amount apportioned to the trading stock under subsection (2) is treated as the price paid for it by the buyer.
Disposals of timber
(4)
For the purposes of this section, a disposal of timber is treated as—
(a)
including the creation or grant of a right to take timber:
(b)
including a disposal of land with standing timber except to the extent to which the timber is any of the following:
(i)
trees that are ornamental or incidental, as evidenced by a certificate given under section 44C of the Tax Administration Act 1994; or
(ii)
timber subject to a forestry right, as defined in section 2 of the Forestry Rights Registration Act 1983, registered under the Land Transfer Act 2017; or
(iii)
timber subject to a profit a prendre granted before 1 January 1984.
Transfers under settlement of relationship property
(5)
A disposal under this section includes a transfer under a settlement of relationship property.
Defined in this Act: amount, business, dispose, financial arrangement, financial arrangements rules, land, market value, registered bank, right to take timber, settlement of relationship property, timber, trading stock
Compare: 2004 No 35 ss FB 4, FF 13(1)
Section EB 24(1): amended (with effect on 1 April 2008), on 7 September 2010, by section 27(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EB 24(4)(b)(ii): amended, on 12 November 2018, by section 250 of the Land Transfer Act 2017 (2017 No 30).
Subpart EC—Valuation of livestock
Contents
Introductory provisions
EC 1 Application of this subpart
When this subpart applies
(1)
This subpart applies to the valuation of property when a person who owns or carries on a business, other than of selling livestock, holds livestock for the purposes of sale or exchange in the ordinary course of carrying on the business.
Groups of livestock
(2)
For the purposes of this subpart, livestock is divided into—
(a)
specified livestock:
(b)
non-specified livestock:
(c)
high-priced livestock:
(d)
bloodstock.
Defined in this Act: bloodstock, business, high-priced livestock, non-specified livestock, specified livestock
Compare: 2004 No 35 s EC 1
Section EC 1(1) heading: replaced (with effect on 1 April 2008), on 2 November 2012, by section 30(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section EC 1(1): replaced (with effect on 1 April 2008), on 2 November 2012, by section 30(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
EC 2 Valuation of livestock
Valuation method
(1)
A person must determine the value of their livestock at the end of each income year by a method that is available under this subpart for them to use.
Use of value
(2)
The value determined under subsection (1) is—
(a)
the closing value of the livestock for the income year for the purposes of section CH 1 (Adjustment for closing values of trading stock, livestock, and excepted financial arrangements); and
(b)
the opening value of the livestock for the next income year for the purposes of section DB 49 (Adjustment for opening values of trading stock, livestock, and excepted financial arrangements).
Defined in this Act: income year
Compare: 2004 No 35 s EC 2
EC 3 Livestock valuation methods
Specified livestock
(1)
The value of specified livestock is determined under sections EC 6 to EC 27.
Non-specified livestock
(2)
The value of non-specified livestock is determined under sections EC 28 to EC 31.
High-priced livestock
(3)
The value of high-priced livestock is determined under sections EC 32 to EC 37.
Bloodstock
(4)
The value of bloodstock is determined under sections EC 38 to EC 48.
Defined in this Act: bloodstock, high-priced livestock, non-specified livestock, specified livestock
Compare: 2004 No 35 s EC 3
EC 4 Transfers of livestock within wholly-owned groups
When this section applies
(1)
This section applies in an income year to livestock held by a company that is part of a wholly-owned group of companies, when—
(a)
a group company (company A) originally acquires and holds the livestock; and
(b)
from the time it is acquired to the end of the income year, the livestock is held within the group by a company or companies that are resident in New Zealand; and
(c)
through transfers within the group, another group company (company B) holds the livestock at the end of the income year; and
(d)
company A and company B remain part of the group at the end of the income year; and
(e)
either—
(i)
the income years of company A and company B end on the same date; or
(ii)
they end on different dates, and the Commissioner has approved both dates as corresponding to the end of a business cycle and as necessary to avoid material distortion of net income that would occur if the income years ended on the same date.
Choice of treatment
(2)
Company B may choose to value the livestock at the cost of the livestock to company A.
When company stops being part of group
(3)
If the companies stop being part of the same wholly-owned group, company B is treated as disposing of and reacquiring the livestock for its market value at the time. If the market value of the livestock cannot be determined separately from other property, its market value at the time company B acquired it is treated as its value.
Defined in this Act: business, Commissioner, company, income year, net income, resident in New Zealand, wholly-owned group of companies
Compare: 2004 No 35 s EC 5
EC 4B Compulsory use of herd scheme method for associated persons
When this section applies
(1)
This section applies if, in an income year (the current year), a person (the transferor) disposes of livestock of a type for which they use the herd scheme (the transfer) to an associated person (the transferee), and the transfer is not in the ordinary course of business.
When this section does not apply
(2)
This section does not apply to the transfer of livestock if,—
(a)
the transferor and the transferee would not be associated if the transferee or an associate were not the descendants in relation to the transferor or an associate of the transferor; and
(b)
the transfer is at market value and the transfer’s consideration is wholly on arm’s length commercial terms and conditions, ignoring terms and conditions relating to financing; and
(c)
for the transferor and associates of the transferor, but excluding their descended associates,—
(i)
all of their specified livestock in the income year of the transfer have been disposed of; and
(ii)
they do not derive income from the disposal of specified livestock that are part of a farming business in the next 4 income years.
When this section does not apply: deceased treated as alive and transferor
(3)
This section does not apply if it would not apply treating a transfer of livestock to or from the estate of a deceased or under a will of a deceased as a transfer made by the deceased immediately before their death to the relevant transferee. However, this subsection does not apply if the will of the deceased creates a life interest in the relevant livestock.
Compulsory use of herd scheme method
(4)
Despite sections EC 7(2), EC 12(1), EC 22(1), and EC 25(1), the transferee is treated as choosing and giving a notice of election, with application beginning for the current year, to use the herd scheme for a type of livestock, if the formula in subsection (5) calculates zero or a positive amount for a class in the type of livestock.
Formula
(5)
The formula, for the purposes of subsections (1) and (4), is—
hypothetical end herd scheme amount − minimum herd scheme amount.
Definition of items in formula
(6)
In the formula,—
(a)
hypothetical end herd scheme amount is the lesser of the following 2 amounts, or the first amount if they are the same:
(i)
the number of animals in the current year that the person would have of a class (the relevant class), adding back animals in all transfers described in subsection (1) that this section would apply to:
(ii)
the number of animals of the relevant class that the person valued under the herd scheme at the end of the year before the current year:
(b)
minimum herd scheme amount is the number of animals of the relevant class that the person has in the current year.
Definitions
(7)
In this section,—
(a)
descendant means the son, daughter, or grandchild of the transferor or of an associate of the transferor:
(b)
descended associate means—
(i)
an associate (the associate) of the transferor that would not be associated if the associate or another associate were not descendants in relation to the transferor or another associate of the transferor:
(ii)
an associate (the associate) of the transferor that carries on a farming business separately from the transferor, and would not be associated if the associate or another associate were not relatives in relation to the transferor or another associate of the transferor.
Defined in this Act: amount, associated, class, descendant, descended associate, herd scheme, income year, notice
Section EC 4B: inserted (with effect on 28 March 2012), on 17 July 2013, by section 39 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
EC 4C Value and timing of transfers
When this section applies
(1)
This section applies to a transfer (the transfer) of specified livestock that section EC 4B applies to.
Same tax year
(2)
If the transfer occurs in the same tax year for both the transferor and transferee, then the transfer is treated as a disposal and acquisition at the value of the relevant livestock under the herd scheme at the end of the transferor’s corresponding income year.
Different tax year
(3)
If the transfer occurs in different tax years for the transferor and transferee, then subsection (4) or (5) applies.
Different tax year: transferee earlier
(4)
If the transferee acquires the relevant livestock in a tax year earlier than the tax year in which the transferor disposes of it, then the transfer is treated as a disposal and acquisition at the value of the relevant livestock under the herd scheme at the beginning of the transferor’s corresponding income year.
Different tax year: transferee later
(5)
If the transferee acquires the relevant livestock in a tax year (the later tax year) later than the tax year in which the transferor disposes of it, then—
(a)
the transfer is treated as a disposal and acquisition at the value of the relevant livestock under the herd scheme at the end of the transferor’s corresponding income year:
(b)
for the purposes of the transferee’s opening value under section EC 16, the transferee is treated as owning and valuing the relevant livestock under the herd scheme on the last day of the transferee’s income year corresponding to the tax year before the later tax year.
Defined in this Act: herd scheme, income year, specified livestock, tax year
Section EC 4C: inserted (with effect on 28 March 2012), on 17 July 2013, by section 39 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
EC 5 Transfer of livestock because of self-assessed adverse event
When this section applies
(1)
This section applies to livestock that is donated, or supplied for consideration with a value that is less than the market value of the livestock, to a recipient—
(a)
for use in a farming or agricultural business that is affected by a self-assessed adverse event; and
(b)
by a donor or supplier who is not associated with the recipient.
Treatment by donor or supplier
(2)
The donor or supplier must treat the livestock as having, on the day of the transfer of the livestock,—
(a)
no value, if the livestock is donated to the recipient:
(b)
the value of the consideration provided by the recipient.
Treatment by recipient
(3)
The recipient must treat the livestock as having, on the day of the transfer of the livestock,—
(a)
no value, if the livestock is donated to the recipient:
(b)
the value of the consideration provided by the recipient.
Defined in this Act: market value, self-assessed adverse event
Compare: 2004 No 35 s EC 5B
Valuation of specified livestock
EC 6 Application of sections EC 7 to EC 27
Sections EC 7 to EC 27 set out the rules for valuing specified livestock.
Defined in this Act: specified livestock
Compare: 2004 No 35 s EC 6
EC 7 Valuation methods
Methods
(1)
The methods available for valuing specified livestock are—
(a)
the herd scheme described in sections EC 14 to EC 21:
(b)
the national standard cost scheme described in sections EC 22 to EC 24:
(c)
1 of the cost price, replacement price, or market value methods described in section EC 25:
(d)
the method described in section EC 26.
Person chooses
(2)
A person must choose which method to use, making their election by using the method chosen in their return of income for the income year.
Election continues
(3)
When a person chooses a valuation method, that method continues to apply in the following income years unless they choose another method that is available to them.
Commissioner’s determination
(4)
If a person chooses a valuation method that is not available to them and they later make no effective election, the Commissioner must determine the method to be used. In doing so, the Commissioner must consult the person.
Restrictions on use of valuation methods
(5)
Restrictions apply to the use of valuation methods, as described in sections EC 8 to EC 10.
Exception to subsection (2): express notice required in certain cases
(6)
Subsection (2) does not apply to the extent to which an election requires a notice under section EC 11.
Defined in this Act: Commissioner, cost price, herd scheme, income year, national standard cost scheme, notice, return of income, specified livestock
Compare: 2004 No 35 s EC 7
Section EC 7(5) heading: replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 40(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 7(5): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 40(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 7(6) heading: inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 40(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 7(6) heading: amended, on 2 June 2016, by section 13 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EC 7(6): inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 40(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 7 list of defined terms notice: inserted (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 40(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
EC 8 Restrictions arising from use of herd scheme
First restriction
(1)
A valuation method other than the herd scheme is not available to a person, in an income year after the 2011–12 income year, for a type of specified livestock if the person—
(a)
gives a notice of election, with application beginning for or before the income year, to use the herd scheme for the type of specified livestock; and
(b)
does not give before 18 August 2011 a later notice of election, with application beginning for or before the income year, to use another valuation method for the type of specified livestock.
First exception: election after 18 August 2011 for fattening business
(2)
Despite subsection (1), a valuation method other than the herd scheme is available to a person in an income year after the 2011–12 income year, if—
(a)
the person gives a notice of election as described in subsection (1)(a); and
(b)
the person gives, on or after 18 August 2011, a later notice of election to use another valuation method for the relevant type of specified livestock (the livestock); and
(c)
the later notice is given, with application beginning for the income year (the starting income year) in which all female breeding livestock cease being intended to be used for breeding purposes; and
(d)
the livestock are used in a fattening farming business for and after the starting income year.
Second exception: increase in a class
(3)
Despite subsection (1), a valuation method other than the herd scheme is available to a person in an income year, to the extent of a person’s animals of a class, in an income year (the current year), that are in excess of the person’s class closing animal balance.
A definition and a formula
(4)
Class closing animal balance means the number of animals of a class calculated using the formula—
last year’s class amount + associated class transfers.
Definition of items in formula
(5)
In the formula,—
(a)
last year’s class amount is the animals of the relevant class that the person valued under the herd scheme at the end of the year before the current year:
(b)
associated class transfers is the amount, if positive, calculated under section EC 4B(5), for the relevant class, that are transferred in the current year to the person to the extent to which section EC 4B(4) applies to the type of animals transferred.
Second restriction
(6)
A person who values livestock of a particular type under the herd scheme must value all male breeding stock of that type under the herd scheme in an income year if, in the income year, they also value any livestock of that type under the national standard cost scheme or under the cost price method.
Defined in this Act: amount, class, class closing animal balance, cost price, herd scheme, income year, national standard cost scheme, notice
Section EC 8: replaced (with effect on 18 August 2011), on 17 July 2013, by section 41(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8(3) heading: replaced (with effect on 28 March 2012), on 17 July 2013, by section 41(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8(3): replaced (with effect on 28 March 2012), on 17 July 2013, by section 41(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8(4) heading: replaced (with effect on 28 March 2012), on 17 July 2013, by section 41(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8(4): replaced (with effect on 28 March 2012), on 17 July 2013, by section 41(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8(5) heading: inserted (with effect on 28 March 2012), on 17 July 2013, by section 41(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8(5): inserted (with effect on 28 March 2012), on 17 July 2013, by section 41(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8(6) heading: inserted (with effect on 28 March 2012), on 17 July 2013, by section 41(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8(6): inserted (with effect on 28 March 2012), on 17 July 2013, by section 41(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8 list of defined terms amount: inserted (with effect on 28 March 2012), on 17 July 2013, by section 41(3) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8 list of defined terms class closing animal balance: inserted (with effect on 28 March 2012), on 17 July 2013, by section 41(3) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 8 list of defined terms notice: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EC 9 Restrictions on use of national standard cost scheme
National standard cost scheme: first restriction on use of scheme
(1)
The national standard cost scheme is not available to a person to value specified livestock in an income year if they value any specified livestock in the income year under the cost price method.
National standard cost scheme: second restriction on use of scheme
(2)
The national standard cost scheme is not available to a person to value specified livestock if, in the income year before the income year in which their election under section EC 7(2) is to apply, they have valued specified livestock under the cost price method, and have not given at least 2 income years’ notice in the way described in section EC 11 to the Commissioner of their election to value specified livestock under the national standard cost scheme.
National standard cost scheme: third restriction on use of scheme
(3)
The national standard cost scheme is not available to a person to value a type of specified livestock in an income year if they have made specified livestock available to another person under a profit-sharing arrangement and, in the income year, the other person, or another person has also made livestock of the type available under the profit-sharing arrangement, values any livestock of the type under the cost price method.
National standard cost scheme: fourth restriction on use of scheme
(4)
The national standard cost scheme is not available to a person to value specified livestock in an income year if—
(a)
they have bailed the livestock to another person under a long-term bailment not made under a profit-sharing arrangement; or
(b)
they have leased the livestock to another person under a long-term bailment not made under a profit-sharing arrangement.
National standard cost scheme: fifth restriction on use of scheme
(5)
The national standard cost scheme is not available to a person to value specified livestock in an income year if a determination made under section EC 24 precludes the use of the national standard cost scheme for the livestock.
Defined in this Act: Commissioner, cost price, income year, lease, long-term bailment, national standard cost scheme, notice, profit-sharing arrangement, specified livestock, type
Compare: 2004 No 35 s EC 9
Section EC 9 list of defined terms notice: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EC 10 Restrictions on use of cost price method
Cost price method: first restriction on use of method
(1)
The cost price method is not available to a person to value specified livestock in an income year if the person values other specified livestock in the income year under the national standard cost scheme.
Cost price method: second restriction on use of method
(2)
The cost price method is not available to a person to value specified livestock if, in the income year before the income year in which their election under section EC 7(2) is to apply, they have valued specified livestock under the national standard cost scheme and have not given 2 income years’ notice in the way described in section EC 11 to the Commissioner of their election to value specified livestock under the cost price method.
Cost price method: third restriction on use of method
(3)
The cost price method is not available to a person to value specified livestock in an income year if they have bailed or leased their specified livestock to another person, unless the livestock is bailed or leased under a profit-sharing arrangement.
Cost price method: fourth restriction on use of method
(4)
The cost price method is not available to a person to value specified livestock in an income year if they have bailed or leased their specified livestock to another person—
(a)
under a long-term bailment; or
(b)
under a short-term bailment made between associated persons in which the consideration paid to the bailee is not a fair market value.
Cost price method: fifth restriction on use of method
(5)
The cost price method is not available to a person to value a type of specified livestock in an income year if they have made specified livestock available to another person under a profit-sharing arrangement and, in the income year, the other person, or another person has also made livestock of the type available under the profit-sharing arrangement, values any livestock of the type under the national standard cost scheme.
Defined in this Act: associated person, Commissioner, cost price, income year, lease, long-term bailment, national standard cost scheme, notice, profit-sharing arrangement, short-term bailment, specified livestock, type
Compare: 2004 No 35 s EC 10
Section EC 10 list of defined terms notice: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EC 11 Restrictions on making of elections
Forms of notice
(1)
This section specifies the 2 forms of notice that a person must give to the Commissioner and when each must be used. When a person notifies the Commissioner of an election under this section, the election is irrevocable in the first income year in which it applies.
When notice in same year required
(2)
For the elections described in this subsection, a person must give notice by the date of filing their return of income for the income year in which the election is first to apply. The elections are—
(a)
an election to value livestock of a particular type under the herd scheme, as described in section EC 14; and
(b)
an election to adopt a herd value ratio or the Chatham Islands adjustment to the herd value ratio for livestock of any type when the income year is the first income year in which the particular livestock is valued under the herd scheme, as described in sections EC 17 to EC 19; and
(c)
a later election, described in section EC 8(2)(b) and (c), to value livestock of a particular type under a valuation method other than the herd scheme.
When 2 years’ notice required
(3)
For the elections described in this subsection, a person must give notice by the date of filing their return of income for an income year that is at least 2 income years before the income year in which the election is first to apply. The elections are—
(a)
an election to stop valuing specified livestock of a particular type under the herd scheme, except when the person continues to value some livestock of that type under the herd scheme or when another valuation method is available, as described in section EC 14(2); and
(b)
an election, after the herd scheme has been adopted, to adopt a herd value ratio or recalculated herd value ratio or the Chatham Islands adjustment for any livestock type, as described in sections EC 17 to EC 19; and
(c)
an election to value specified livestock under the national standard cost scheme when the person has, in the income year before the application of the new election, valued the same livestock under the cost price method; and
(d)
an election to value specified livestock under the cost price method when the person has, in the year before the application of the new election, valued the same livestock under the national standard cost scheme.
Information for notices of election
(4)
A notice of election must state—
(a)
the income year in which the election is first to apply; and
(b)
the type, class, or other description of the applicable livestock; and
(c)
the existing and proposed methods of valuing the applicable livestock; and
(d)
for an election to use a herd value ratio or recalculated herd value ratio under section EC 17,—
(i)
the value assessed under section EC 17(4) of an average animal of each applicable class of livestock; and
(ii)
the date on which the valuation of each animal was made; and
(iii)
the name and address of the valuer.
Defined in this Act: class, Commissioner, cost price, herd scheme, herd value ratio, income year, national standard cost scheme, notice, notify, return of income, specified livestock, type
Compare: 2004 No 35 s EC 11
Section EC 11(2)(b): amended (with effect on 18 August 2011), on 17 July 2013, by section 42 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 11(2)(c): inserted (with effect on 18 August 2011), on 17 July 2013, by section 42 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
EC 12 Interests in livestock
Joint election of valuation method
(1)
When specified livestock is owned jointly by 2 or more persons, the owners must choose a valuation method. For the election to be effective, it must be made jointly by all the owners.
Ineffective election
(2)
If there is no effective election, specified livestock owned jointly is valued as follows:
(a)
if the owners bail or lease the livestock to another person during the income year, under the market value method; or
(b)
if the owners enter into a profit-sharing arrangement for the livestock, under the market value method; or
(c)
in any other case, under the national standard cost scheme.
Profit-sharing arrangements
(3)
If the method used in an income year to calculate the value of livestock under a profit-sharing arrangement is the national standard cost scheme or the cost price method, all the following are treated as the single owner of the livestock:
(a)
the person who owns the livestock; and
(b)
the person who has the use of the livestock; and
(c)
any other person who has made livestock of the same type available to the person referred to in paragraph (b) under a profit-sharing arrangement.
Partnerships interests
(4)
For the purpose of an election under this section, a person’s interest in a partnership that owns livestock is treated separately from any other interest that the person has in livestock. Separate elections are required for the person’s partnership interest and for their other livestock interests. The person is not required to choose the same valuation method in both cases.
Look-through company owners’ interests
(5)
For the purposes of an election under this section, a person’s interest for a look-through company that owns livestock is treated separately from any other interest that the person has in livestock. Separate elections are required for the person’s owner’s interest and for their other livestock interests. The person is not required to choose the same valuation method in both cases.
Defined in this Act: cost price, income year, lease, look-through company, national standard cost scheme, owner’s interests, profit-sharing arrangement, specified livestock, type
Compare: 2004 No 35 s EC 12
Section EC 12(5) heading: added, on 1 April 2011 (applying for income years beginning on or after 1 April 2011), by section 46(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EC 12(5): added, on 1 April 2011 (applying for income years beginning on or after 1 April 2011), by section 46(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EC 12 list of defined terms look-through company: inserted, on 1 April 2011, by section 46(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EC 12 list of defined terms owner’s interests: inserted, on 1 April 2011, by section 46(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
EC 13 Changes in partnership interests
When this section applies
(1)
This section applies when—
(a)
a partnership owns specified livestock (the old partnership); and
(b)
a new partnership is formed (the new partnership); and
(c)
at the end of the income year in which the new partnership is formed, more than 50% of the property of the new partnership is owned by persons who, during that income year or in the previous income year,—
(i)
owned all the property of the old partnership; and
(ii)
derived income in either income year from specified livestock of the same type as that owned by the new partnership.
Valuation
(2)
The value of specified livestock owned by the new partnership must be taken into account in the way the old partnership determines the value of livestock of the particular type at the end of the income year in which the new partnership is formed. If the old partnership has no specified livestock of the type on hand at the end of the income year, the value is taken into account as the old partnership would have determined it, had it owned specified livestock of that type.
Defined in this Act: income, income year, specified livestock, type
Compare: 2004 No 35 s EC 13
Herd scheme
EC 14 Herd scheme
Election to use herd scheme
(1)
A person may choose to value specified livestock of any type and class under the herd scheme.
Election of other method
(2)
A person who has chosen to value livestock of a particular type under the herd scheme may nevertheless value livestock of that type by another method, subject to the restrictions described in section EC 8.
Election to leave herd scheme
(3)
A person who wishes to stop valuing livestock of a particular type under the herd scheme must give 2 income years’ notice to the Commissioner in the way described in section EC 11. However, notice is not required if the person values livestock of that type by another method that is available for use in conjunction with the herd scheme.
Defined in this Act: class, Commissioner, herd scheme, income year, notice, specified livestock, type
Compare: 2004 No 35 s EC 14
EC 15 Determining national average market values
Determined by Commissioner
(1)
The Commissioner must determine a national average market value for an income year for each class of specified livestock set out in schedule 17, column 2 (Types and classes of livestock).
Application to income year
(2)
The value applies to the income year for which it is determined, whether the income year started before, on, or after the date on which the determination is made.
Secondary legislation
(3)
A determination under subsection (1) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: class, Commissioner, income year, national average market value, specified livestock
Compare: 2004 No 35 s EC 15
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | It is not required to be published | LA19 s 73(2) | ||
| Presentation | It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 of the Legislation Act 2019 | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
EC 16 Valuation under herd scheme
Closing value of herd livestock
(1)
The closing value of herd livestock in an income year is either its herd value for the income year or, if a herd value ratio is adopted, its herd value multiplied by its herd value ratio.
Opening value of herd livestock
(2)
The opening value of herd livestock in an income year is determined under subsection (3) if a person—
(a)
has valued the livestock under the herd scheme in the previous income year; and
(b)
has the livestock on hand at the start of the income year; and
(c)
has not chosen to value the livestock by a different method for the income year.
Determining opening value
(3)
The opening value of herd livestock in an income year is either its herd value for the income year or, if the person has adopted a herd value ratio, its herd value for the income year multiplied by its herd value ratio for the previous income year. This subsection overrides section DB 49(3) (Adjustment for opening values of trading stock, livestock, and excepted financial arrangements).
Defined in this Act: herd livestock, herd scheme, herd value, herd value ratio, income year
Compare: 2004 No 35 s EC 16
Section EC 16(3): amended (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 22(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
EC 17 Herd value ratio
Adoption of herd value ratio
(1)
A herd value ratio is available for a person to use in determining the value of specified livestock in the herd scheme. A person may adopt a herd value ratio for herd livestock of a particular type by giving notice in the way described in section EC 11. A person may also adopt a recalculated ratio by giving notice in the same way.
Chatham Islands livestock
(2)
Herd value ratios calculated under subsection (5) do not apply to livestock on the Chatham Islands. The Chatham Islands adjustment to the herd value ratio is dealt with in section EC 19.
When herd value ratio applies
(3)
When a person adopts a herd value ratio for livestock of a particular type, the ratio applies in the income year specified in the notice and in later income years until—
(a)
the income year in which it is superseded by a recalculation of the ratio; or
(b)
the income year in which the person stops valuing, under an election, livestock of that type under the herd scheme; or
(c)
the income year following 2 consecutive income years in which the person has not valued livestock of that type under the herd scheme.
Assessment of average value
(4)
For the purpose of calculating a herd value ratio, a person must obtain from a recognised livestock valuer an assessment of the value of an average animal of that person in each applicable class of livestock. The value is determined as at the 30 April that is closest to the day on which the national average market values are set.
Calculation of herd value ratio
(5)
The herd value ratio for livestock of a particular type is calculated by using the formula in subsection (6) and rounding the result of the calculation to the nearest of the following figures: 0.9, 1.0, 1.1, 1.2, 1.3.
Formula
(6)
The formula is—
Σ(average value × number) ÷ Σ(herd value × number).
Definition of items in formula
(7)
In the formula,—
(a)
Σ is the total of the individual calculations for all applicable classes of livestock type valued under the herd scheme:
(b)
average value is the average value of an animal in a class as described in subsection (4):
(c)
number is the number of all livestock of that class on hand at the end of the income year, including livestock that are not in the herd scheme, but not including high-priced livestock:
(d)
herd value is the herd value of livestock for a class.
Defined in this Act: class, herd livestock, herd scheme, herd value, herd value ratio, high-priced livestock, income year, livestock on the Chatham Islands, national average market value, notice, specified livestock, type
Compare: 2004 No 35 s EC 17
EC 18 Inaccurate herd value ratio
The Commissioner may require a person who is using an inaccurate herd value ratio for a type of livestock in an income year to recalculate the herd value ratio. If the recalculation differs from the existing ratio for the income year, the Commissioner may amend the assessment of income tax for the income year and any later income year and may substitute the recalculated herd value ratio for that previously applied by the person.
Defined in this Act: assessment, Commissioner, herd value ratio, income tax, income year, type
Compare: 2004 No 35 s EC 18
EC 19 Chatham Islands adjustment to herd value
Adjustment for herd livestock on Chatham Islands
(1)
A person may adopt an adjustment for herd livestock on the Chatham Islands by giving notice in the way described in section EC 11.
When adjustment applies
(2)
When a person adopts a Chatham Islands adjustment as a herd value ratio, it applies as a herd value ratio to a particular type of livestock on the Chatham Islands at the end of the income year specified in the notice and in later income years until—
(a)
the income year in which the person stops valuing, under an election, livestock of that type in the herd scheme; or
(b)
the income year following 2 consecutive income years in which the person has not valued livestock of that type on the Chatham Islands under the herd scheme.
Setting adjustment
(3)
The Commissioner must set and may vary from time to time the level of Chatham Islands adjustment to the herd value ratio that applies in an income year.
Secondary legislation
(4)
The instrument that sets or varies an adjustment under subsection (3) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: Commissioner, herd livestock, herd scheme, herd value, herd value ratio, income year, livestock on the Chatham Islands, notice, type
Compare: 2004 No 35 s EC 19
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | It is not required to be published | LA19 s 73(2) | ||
| Presentation | It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 of the Legislation Act 2019 | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
EC 20 Herd livestock disposed of before values determined
When this section applies
(1)
This section applies when, in an income year, a person—
(a)
stops deriving income from the disposal of specified livestock; and
(b)
disposes of specified livestock before the 1 November that precedes the determination of the national average market values for the income year; and
(c)
[Repealed]When this section does and does not apply
(1B)
This section does not apply when, in an income year, a person’s specified livestock is disposed of, and section EC 4B(4) applies to the transfer. However, if section EC 4C(4) applies to the transfer, then this section may apply.
Value of herd livestock
(2)
The value of herd livestock that is disposed of is either the herd value of the livestock for the previous income year or, if the person has adopted a herd value ratio, the herd value multiplied by the herd value ratio applying in the previous income year.
Defined in this Act: Commissioner, herd livestock, herd value, herd value ratio, income, income year, national average market value, notice, specified livestock
Compare: 2004 No 35 s EC 20
Section EC 20(1)(a): amended (with effect on 1 April 2012 and applying for the 2012–13 and later income years), on 17 July 2013, by section 43(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 20(1)(b): amended (with effect on 1 April 2012 and applying for the 2012–13 and later income years), on 17 July 2013, by section 43(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 20(1)(c): repealed (with effect on 1 April 2012 and applying for the 2012–13 and later income years), on 17 July 2013, by section 43(3) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 20(1B) heading: inserted (with effect on 1 April 2012 and applying for the 2012–13 and later income years), on 17 July 2013, by section 43(4) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EC 20(1B): inserted (with effect on 1 April 2012 and applying for the 2012–13 and later income years), on 17 July 2013, by section 43(4) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
EC 21 Herd livestock on death before values determined
[Repealed]Section EC 21: repealed (with effect on 28 March 2012), on 17 July 2013, by section 44 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
National standard cost scheme
EC 22 National standard cost scheme
Election to use national standard cost scheme
(1)
A person may choose to value specified livestock under the national standard cost scheme, subject to the restrictions described in section EC 9.
Closing value
(2)
The closing value of the livestock is the cost of the livestock calculated under the determination made by the Commissioner under section EC 24.
Defined in this Act: Commissioner, national standard cost scheme, specified livestock
Compare: 2004 No 35 s EC 22
EC 23 Determining national standard costs
Determination of costs
(1)
The Commissioner must determine national standard costs for each category of specified livestock in schedule 18 (Categories of livestock for which national standard costs to be declared). The determination must take into account, as applicable,—
(a)
the average breeding, rearing, and growing costs for animals in the category; and
(b)
the average rearing and growing costs for animals in the category.
Application to income year
(2)
The national standard costs apply to the income year for which they are determined, whether the income year started before, on, or after the date on which the determination is made.
Secondary legislation
(3)
A determination under subsection (1) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: Commissioner, income year, specified livestock
Compare: 2004 No 35 s EC 23
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | It is not required to be published | LA19 s 73(2) | ||
| Presentation | It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 of the Legislation Act 2019 | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
EC 24 Methods for determining costs using national standard cost scheme
Determination of methods for calculation of cost
(1)
The Commissioner must determine the methods for calculating the cost of livestock listed in schedule 18, column 2 (Categories of livestock for which national standard costs to be declared).
Average cost
(2)
For the purposes of subsection (1), the determination must establish a process for finding an average cost to be applied to all specified livestock valued under the national standard cost scheme. The process must take into account—
(a)
the number of homebred livestock that a person has on hand at any time in an income year, applying to the number the relevant national standard costs determined under section EC 23:
(b)
in addition to paragraph (a), the number in each category of livestock listed in schedule 18, column 2 that a person has on hand at any time in an income year, applying to the number the relevant national standard costs determined under section EC 23:
(c)
the number of livestock acquired other than by way of being homebred, applying to the number the acquisition costs associated with the livestock.
Content of determination
(3)
The matters that may be included in the determination are set out in section 91AAD of the Tax Administration Act 1994.
Secondary legislation
(4)
A determination under subsection (1) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: Commissioner, income year, national standard cost scheme, specified livestock
Compare: 2004 No 35 s EC 24
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | It is not required to be published | LA19 s 73(2) | ||
| Presentation | It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 of the Legislation Act 2019 | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
Section EC 24(2)(c): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 24(4) heading: inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Section EC 24(4): inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Other methods
EC 25 Cost price, replacement price, or market value
Election
(1)
A person may choose to value specified livestock under the cost price method, subject to the restrictions described in section EC 10, or under the replacement price method, or under the market value method.
Changing to cost price method
(2)
If a person chooses in an income year to change to the cost price method from another valuation method, the opening value of the affected livestock is the closing value of the livestock at the end of the previous income year determined under the method used in that previous income year.
Defined in this Act: cost price, income year, specified livestock
Compare: 2004 No 35 s EC 25
EC 26 Bailee’s treatment of livestock
When this section applies
(1)
This section applies when, under a bailment, lease, or other agreement,—
(a)
a person (person A) has the use of specified livestock; and
(b)
person A is required—
(i)
to return the livestock to the person who made it available; or
(ii)
to pay the person full compensation for it.
Closing livestock numbers
(2)
Person A is treated as owning, and must take into account at the end of an income year, the total number for all classes calculated using the formula—
total livestock − bailed livestock.
Definition of items in formula
(3)
In the formula,—
(a)
total livestock is all the livestock that person A has on hand in a class at the end of the income year, including—
(i)
the livestock that they own; and
(ii)
the livestock that they have the use of under the bailment, lease, or other agreement:
(b)
bailed livestock is all the livestock in a class that person A has been given the use of under a bailment, lease, or other agreement that remains in force at the end of the income year.
Result of applying formula
(4)
If the result of applying the formula in subsection (2) is positive, person A is treated as the owner of any surplus livestock. If the result is negative, person A must adjust the total number described in subsection (2) by treating it as a negative number.
Defined in this Act: class, income year, lease, pay, specified livestock
Compare: 2004 No 35 s EC 26
Partnerships: cost price and national standard cost scheme
Heading: inserted (with effect on 1 April 2009), on 6 October 2009, by section 114(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EC 26B Entering partners’ cost base
When this section applies
(1)
This section applies when an entering partner has acquired specified livestock that includes female breeding livestock for which section HG 10 (Disposal of livestock) applies, and the partners use the cost price method or the national standard cost scheme.
Existing cost base
(2)
For the specified livestock, the entering partner is treated as having the same existing cost base that the exiting partner would have had for the purposes of the cost price method or national standard cost scheme for an income year, if they had not disposed of the interests.
Addition to cost base
(3)
For the purposes of determining the value of the specified livestock at the end of an income year for the purposes of section EC 2, the entering partner must add to the existing cost base, described in subsection (2), the amount for the income year (the current year) calculated using the following formula:
livestock cost base difference × current year count ÷ allowed years.
Definition of items in formula
(4)
In the formula,—
(a)
livestock cost base difference is the cost base that the entering partner would have for the specified livestock at the end of the income year in which the acquisition of the specified livestock occurred, ignoring subsection (2) reduced by the entering partner’s existing cost base for the specified livestock at the end of that year, described in subsection (2). It must be a positive number:
(b)
current year count,—
(i)
is the allowed years reduced by the number of years between the current year and the income year in which the entering partner’s acquisition of the specified livestock occurred, ignoring years in which the partners do not use the cost price method or national standard cost scheme (for example: current year count is 1, if the allowed years is 4, and the acquisition of the specified livestock occurred in the 2010–11 income year, and the current year is the 2013–14 income year, and the relevant method or scheme was used for all relevant income years):
(ii)
may equal the allowed years (for example: the current year is the same year as the income year in which the entering partner’s acquisition of the specified livestock occurred), but must not be a negative number:
(c)
allowed years is—
(i)
4, if the partners acquire or dispose of any partnership interests that include any livestock after the entering partner’s acquisition of the specified livestock and before the end of the income year in which that acquisition occurred; or
(ii)
5, if the partners do not acquire or dispose of any partnership interests that include any livestock after the entering partner’s acquisition of the specified livestock and before the end of the income year in which that acquisition occurred.
Defined in this Act: amount, cost price, dispose, entering partner, exiting partner, income year, national standard cost scheme, partner, partner’s interest, specified livestock
Section EC 26B: inserted (with effect on 1 April 2009), on 6 October 2009, by section 114(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EC 26B list of defined terms entering partner: inserted, on 30 March 2017, by section 56 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EC 26B list of defined terms exiting partner: inserted, on 30 March 2017, by section 56 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Definitions
EC 27 Some definitions
In this subpart,—
long-term bailment is a bailment or lease under which, at the time a person delivers livestock, the person does not expect to have the same livestock delivered back to them
short-term bailment is a bailment or lease under which,—
(a)
at the time a person delivers livestock, the person expects to have the same livestock delivered back to them; and
(b)
the bailee or lessee did not provide consideration to the person for the delivery of the livestock; and
(c)
the term of the bailment or lease ends on or before the end of the income year following the income year in which the arrangement is made.
Defined in this Act: arrangement, income year, lease, long-term bailment, short-term bailment
Compare: 2004 No 35 s EC 27
Valuation of non-specified livestock
EC 28 Application of sections EC 29 to EC 31
Sections EC 29 to EC 31 set out the rules for valuing non-specified livestock.
Defined in this Act: non-specified livestock
Compare: 2004 No 35 s EC 28
EC 29 Determining standard values
Determined by Commissioner
(1)
The Commissioner may determine a standard value for an income year for a type or category of non-specified livestock.
Application to income year
(2)
A standard value applies to the income year for which it is determined, whether the income year started before, on, or after the date on which the standard value is determined.
Secondary legislation
(3)
A determination under subsection (1) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: Commissioner, income year, non-specified livestock, standard value, type
Compare: 2004 No 35 s EC 29
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | It is not required to be published | LA19 s 73(2) | ||
| Presentation | It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 of the Legislation Act 2019 | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
EC 30 Closing value methods
A person may choose 1 of the following methods to value non-specified livestock on hand at the end of an income year:
(a)
its cost price:
(b)
its replacement price:
(c)
its market value:
(d)
if the Commissioner agrees, its standard value.
Defined in this Act: Commissioner, cost price, income year, non-specified livestock, standard value
Compare: 2004 No 35 s EC 30
EC 31 Enhanced production
When this section applies
(1)
This section applies when a person who derives income from non-specified livestock—
(a)
enhances production in an income year by—
(i)
starting, or restarting, to derive income from non-specified livestock; or
(ii)
bringing land into production, or substantially increased production, for the purpose of deriving income from non-specified livestock; or
(iii)
acquiring additional land for the purpose of deriving income from non-specified livestock; and
(b)
as a result, in an income year or over the following 3 income years, acquires more non-specified livestock that—
(i)
is not replacement livestock; and
(ii)
is not homebred livestock; and
(iii)
is valued at its standard value.
Closing value
(2)
The closing value of the livestock acquired is,—
(a)
for the income year in which the livestock was acquired, its standard value plus two-thirds of the difference between the cost price of the livestock and the standard value:
(b)
for the following income year, its standard value plus one-third of the difference between the cost price of the livestock and the standard value:
(c)
for other income years, its standard value.
Defined in this Act: cost price, income, income year, non-specified livestock, standard value
Compare: 2004 No 35 s EC 31
Section EC 31(1)(b): replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 114(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 31(2): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 114(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 31(2)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 114(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Valuation of high-priced livestock
EC 32 Application of sections EC 33 to EC 37
Sections EC 33 to EC 37
(1)
Sections EC 33 to EC 37 set out the rules for valuing high-priced livestock.
Person chooses valuation method
(2)
A person may choose to use either the straight-line method or the diminishing value method to value high-priced livestock.
Diminishing value method
(3)
If the person chooses to use the diminishing value method, they must give notice to the Commissioner that they are using the method at the time of filing their return of income for the first income year in which the value of the high-priced livestock is determined under section EC 34. The person cannot revoke their election to use the diminishing value method for the livestock.
Defined in this Act: Commissioner, high-priced livestock, income year, notice, return of income
Compare: 2004 No 35 s EC 32
EC 33 Determining depreciation percentages
Determined by Commissioner
(1)
The Commissioner must determine a depreciation percentage for an income year for each type, class, or category of high-priced livestock.
Purpose
(2)
The percentage represents the average percentage decline in the value of livestock of the type, class, or category.
Factors
(3)
The Commissioner must take into account—
(a)
the average cost of livestock of the type, class, or category; and
(b)
the estimated useful life of the livestock; and
(c)
the average estimated residual market value of the livestock.
Secondary legislation
(4)
A determination under subsection (1) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: class, Commissioner, depreciation percentage, estimated residual market value, estimated useful life, high-priced livestock, income year, type
Compare: 2004 No 35 s EC 33
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | It is not required to be published | LA19 s 73(2) | ||
| Presentation | It is not required to be presented to the House of Representatives because a transitional exemption applies under Schedule 1 of the Legislation Act 2019 | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
EC 34 General rule
Value in income year of acquisition and later income years
(1)
The closing value of high-priced livestock at the end of the income year in which it is acquired is its cost price minus the reduction applying in the income year. In a later income year, the value is its opening value minus the reduction applying in the income year until the value reaches or falls below the national average market value for the class to which the livestock belongs.
Straight-line method
(2)
When a person has chosen to use the straight-line method, the reduction is calculated using the formula—
cost price × depreciation percentage.
Diminishing value method
(3)
When a person has chosen to use the diminishing value method, the reduction is calculated as follows:
(a)
in the first income year in which the election applies, the cost price multiplied by the diminishing value equivalent of the depreciation percentage for the income year:
(b)
in later income years, the opening value of the livestock multiplied by the diminishing value equivalent of the depreciation percentage for the income year.
Meaning of diminishing value equivalent
(4)
In this section, diminishing value equivalent, for a depreciation percentage, means the diminishing value depreciation rate in schedule 12, column 1 (Old banded rates of depreciation) to which the amount in column 2 equal to the depreciation percentage is the straight-line equivalent. Two qualifications are—
(a)
if no amount in column 2 is equal to the depreciation percentage, the amount closest to it is taken; and
(b)
if 2 amounts in column 2 are equidistant from the depreciation percentage, the depreciation percentage is rounded down.
Exclusions
(5)
This section does not apply in the cases described in sections EC 35 and EC 36.
Defined in this Act: amount, class, cost price, depreciation percentage, diminishing value equivalent, high-priced livestock, income year, national average market value
Compare: 2004 No 35 s EC 34
Section EC 34(1) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 34(1): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EC 35 Livestock reaching national average market value and livestock no longer used for breeding
Livestock at or less than national average market value
(1)
This section applies to a person’s high-priced livestock whose value at the end of an income year is equal to or less than the national average market value for the class to which the livestock belongs.
Livestock no longer used for breeding
(2)
This section also applies to high-priced livestock that, in an income year, a person—
(a)
does not expect to use for breeding for that or any later income year; and
(b)
does not intend to dispose of to any other person to use for breeding.
Closing value
(3)
The closing value of the high-priced livestock at the end of the income year is determined as follows:
(a)
when the person values any specified livestock of that type under the herd scheme for the income year, the value of the animal under the herd scheme; and
(b)
when the person values all specified livestock of that type that is older than 1 year under the national standard cost scheme or the cost price method, the national average market value for the income year of livestock of the class to which the animal belongs; and
(c)
when the person values all specified livestock of that type that is older than 1 year under the market value method or the replacement price method, the market value or replacement price of the animal at the end of the income year.
Valuation in later income years
(4)
In later income years, the animal that was high-priced livestock is treated as the person’s specified livestock and is valued under the valuation method the person chooses for specified livestock of the type to which the animal belongs.
Entry into herd scheme in later income years
(5)
This subsection applies if, in a later income year (year A), the person values any specified livestock of the same type as the animal under the herd scheme and, in the next year, values the animal under the herd scheme. The animal is treated as if it were valued under the herd scheme at the end of year A.
Defined in this Act: class, cost price, herd scheme, high-priced livestock, income year, national average market value, national standard cost scheme, specified livestock, type, year
Compare: 2004 No 35 s EC 35
EC 36 Immature livestock and recently acquired livestock
Immature livestock
(1)
This section applies to high-priced livestock that is less than 1 year old at the end of the income year in which it is acquired.
Recently acquired livestock
(2)
This section also applies to high-priced livestock that is acquired within 6 months of the end of an income year and, during that time,—
(a)
is not used for insemination, in the case of male livestock; and
(b)
is not used for the collection of semen; and
(c)
does not give birth; and
(d)
does not have ova removed.
Closing value
(3)
The closing value of the high-priced livestock at the end of the income year is its cost price.
Defined in this Act: cost price, high-priced livestock, income year, year
Compare: 2004 No 35 s EC 36
Section EC 36 heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 36(1): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 36(2) heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 36(2): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EC 37 Bailment
In section EC 26, references to specified livestock include high-priced livestock.
Defined in this Act: high-priced livestock, specified livestock
Compare: 2004 No 35 s EC 37
Valuation of bloodstock
EC 38 Application of sections EC 39 to EC 48
Sections EC 39 to EC 48 set out the rules for valuing bloodstock.
Defined in this Act: bloodstock
Compare: 2004 No 35 s EC 38
EC 39 First income year in breeding business
Bloodstock to which this section applies
(1)
This section applies to bloodstock that is 2 years of age or older at the end of the first income year in which a person—
(a)
uses the bloodstock for breeding in their breeding business; or
(b)
forms the intention of using the bloodstock for breeding in their breeding business; or
(c)
acquires the bloodstock, with the intention of using it for breeding in their breeding business.
Special group of broodmares to which this section applies
(2)
This section also applies to a broodmare that is 2 years of age or older at the end of a person’s first income year after 1 April 2001 in which the person—
(a)
first uses the broodmare for breeding in their breeding business; or
(b)
first forms the intention of using the broodmare for breeding in their breeding business; or
(c)
acquires the broodmare, with the intention of using it for breeding in their breeding business.
Prospective breeders’ bloodstock to which this section applies
(2B)
This section also applies to stud-founding bloodstock at the end of the prospective bloodstock breeder’s first income year in which the stud-founding bloodstock is 2 years of age.
Closing value
(3)
The closing value of the bloodstock at the end of the first income year is its cost price minus the reduction applying in that income year.
Determination of reduction
(4)
The reduction that applies is determined under section EC 41, EC 42, EZ 5, or EZ 6 (which relate to bloodstock).
Defined in this Act: bloodstock, broodmare, business, cost price, income year, prospective bloodstock breeder, stud-founding bloodstock, year
Compare: 2004 No 35 s EC 39
Section EC 39(1)(c): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 39(2)(c): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 39(2B) heading: inserted (with effect on 1 January 2019), on 18 March 2019, by section 158(1) (and see section 158(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EC 39(2B): inserted (with effect on 1 January 2019), on 18 March 2019, by section 158(1) (and see section 158(3) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EC 39 list of defined terms prospective bloodstock breeder: inserted (with effect on 1 January 2019), on 18 March 2019, by section 158(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EC 39 list of defined terms stud-founding bloodstock: inserted (with effect on 1 January 2019), on 18 March 2019, by section 158(2) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EC 39B Stud-founding bloodstock and related terms
Meaning of stud-founding bloodstock
(1)
Stud-founding bloodstock means high-priced bloodstock that a prospective bloodstock breeder owns if—
(a)
the prospective bloodstock breeder acquires the high-priced bloodstock before it is 2 years of age; and
(b)
within 4 months after the day on which the prospective bloodstock breeder acquires the high-priced bloodstock—
(i)
the prospective bloodstock breeder notifies the Commissioner of their intention to use the high-priced bloodstock for breeding bloodstock for profit; and
(ii)
information as the Commissioner requires is provided to the Commissioner; and
(c)
the high-priced bloodstock is registered in the New Zealand Stud Book or in the New Zealand Harness Racing Stud Book.
Meaning of high-priced bloodstock
(2)
High-priced bloodstock means bloodstock that—
(a)
is sold, when a yearling, at a premier yearling sale for an amount greater than the relevant national minimum price threshold for the calendar year in which the sale occurs; and
(b)
is expected, when sold at the premier yearling sale, to be capable of being used for breeding when it reaches maturity.
Meaning of prospective bloodstock breeder
(3)
A prospective bloodstock breeder means a person who acquires bloodstock—
(a)
when they do not have an existing bloodstock breeding business; and
(b)
with the intention of—
(i)
having the bloodstock first raced in New Zealand; and
(ii)
using the bloodstock for breeding bloodstock in New Zealand for profit.
Meaning of premier yearling sale
(4)
A premier yearling sale means a sale of bloodstock yearlings that is listed in schedule 18B (Premier yearling sales).
Meaning of national minimum price threshold
(5)
National minimum price threshold, for a class of bloodstock and for a calendar year, means the national minimum price threshold set under section EC 39C or by section EZ 6B (National minimum price threshold for 2019 calendar year), as applicable, for bloodstock of the class for the calendar year.
Defined in this Act: bloodstock, business, Commissioner, high-priced bloodstock, national minimum price threshold, New Zealand, premier yearling sale, prospective bloodstock breeder, stud-founding bloodstock
Section EC 39B: inserted (with effect on 1 January 2019), on 18 March 2019, by section 159(1) (and see section 159(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EC 39B(5): replaced, on 1 January 2020, by section 160 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EC 39C Setting and publication of national minimum price threshold
Setting of national minimum price threshold
(1)
The Commissioner must set a national minimum price threshold for each class of bloodstock set out in schedule 18C, column 2 (Breeds and classes of bloodstock). The national minimum price threshold for a calendar year (the threshold year) must be set at the amount given by,—
(a)
for each class of the standardbred breed of horses,—
(i)
for each of the 3 calendar years immediately preceding the threshold year, calculating the value at the 97th percentile of sale prices for that class at the premier yearling sales in the calendar year; and
(ii)
dividing the sum of the 3 percentile values calculated in subparagraph (i) by 3; and
(iii)
rounding the amount calculated in subparagraph (ii) to the nearest multiple of $1,000, with the amount being rounded up if it ends in $500:
(b)
for each class of the thoroughbred breed of horses,—
(i)
for each of the 3 calendar years immediately preceding the threshold year, calculating the value at the 95th percentile of sale prices for that class at the premier yearling sales in the calendar year; and
(ii)
dividing the sum of the 3 percentile values calculated in subparagraph (i) by 3; and
(iii)
rounding the amount calculated in subparagraph (ii) to the nearest multiple of $1,000, with the amount being rounded up if it ends in $500.
When national minimum price threshold must be set and published
(2)
The Commissioner must set and publish the national minimum price threshold that applies for a calendar year before the first premier yearling sale in that calendar year is held.
Consequence of late setting and publication of national minimum price threshold
(3)
This subsection applies when the Commissioner does not set and publish the national minimum price threshold that applies for a calendar year before the first premier yearling sale in that calendar year is held. For sales of bloodstock yearlings at the premier yearling sales that occur before the Commissioner has set and published the national minimum price threshold that applies for that calendar year, the national minimum price threshold for each class of bloodstock set out in schedule 18C, column 2 that has most recently been set under section EC 39C or by section EZ 6B (National minimum price threshold for 2019 calendar year) is, for the purposes of section EC 39B(2), treated as being the national minimum price threshold for the calendar year in which the sale occurs.
Defined in this Act: bloodstock, Commissioner, national minimum price threshold, premier yearling sale
Section EC 39C: inserted, on 1 January 2020, by section 161(1) (and see section 161(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EC 40 Later income years in breeding business
What this section applies to
(1)
This section applies to the income years that follow the first income year described in section EC 39.
Closing value
(2)
The closing value of the bloodstock is its opening value minus the reduction applying in that income year.
Closing value not previously taken into account
(3)
If the person has not taken the closing value of the bloodstock into account in the previous income year, the closing value is the cost price of the bloodstock minus the reduction applying in the income year in which the person makes the calculation.
Determination of reduction
(4)
The reduction that applies is determined under section EC 41, EC 42, EZ 5, or EZ 6 (which relate to bloodstock).
Defined in this Act: bloodstock, cost price, income year
Compare: 2004 No 35 s EC 40
EC 41 Reduction: bloodstock not previously used for breeding in New Zealand other than as shuttle stallions
Bloodstock to which this section applies
(1)
This section applies to bloodstock that—
(a)
was not used for breeding in New Zealand before 16 December 1991; and
(b)
before a person (person A) acquired it, was not used for breeding in New Zealand by any other person.
Further bloodstock to which this section applies
(1B)
This section also applies to bloodstock that, before person A acquired it, was used by another person for breeding in New Zealand if—
(a)
the other person transferred the bloodstock to person A under a relationship agreement to which section FB 18 (Bloodstock) applies:
(b)
the other person was a company in the same wholly-owned group as person A at the time person A acquired the bloodstock from the other person:
(c)
the bloodstock is a stallion that, for each year in which the stallion was used for breeding in New Zealand before being acquired by person A, was—
(i)
owned by a non-resident; and
(ii)
removed from New Zealand after the breeding season; and
(iii)
not subject to a reduction under this section.
Stallion
(2)
For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a stallion is 50% of the cost price of the stallion unless person A chooses to value the stallion by the reducing value method.
Stallion valued by reducing value method
(3)
When person A chooses to value the stallion by the reducing value method, the reduction applying to the value of the stallion is 75% of its cost price in the first income year and 75% of its opening value in each later income year. Person A must give notice to the Commissioner of their election in their return of income for the first income year.
Broodmare when first used on or after 1 April 2001
(4)
For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a broodmare to which section EC 39(2) applies is calculated using the formula—
1.25 × cost price of broodmare ÷ (9 − age of broodmare).
Definition of item in formula
(5)
In the formula, age of broodmare is—
(a)
8 years of age; or
(b)
the actual age in years, if the broodmare is 7 years of age or less at the end of the income year.
Relationship with section EZ 5
(6)
This section is overridden by section EZ 5 (Reduction: bloodstock not previously used for breeding in New Zealand: pre-1 August 2006).
Defined in this Act: bloodstock, broodmare, Commissioner, company, cost price, income year, New Zealand, notice, relationship agreement, return of income, stallion, wholly-owned group, year
Compare: 2004 No 35 s EC 41
Section EC 41 heading: amended, on 1 April 2008, by section 354(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EC 41(1)(b): substituted, on 1 April 2008, by section 354(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EC 41(1B) heading: inserted, on 1 April 2008, by section 354(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EC 41(1B): inserted, on 1 April 2008, by section 354(3) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EC 41(1B)(a): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 24 February 2016, by section 115(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 41 list of defined terms matrimonial agreement: repealed (with effect on 1 April 2008), on 24 February 2016, by section 115(2)(a) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 41 list of defined terms relationship agreement: inserted (with effect on 1 April 2008), on 24 February 2016, by section 115(2)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EC 42 Reduction: bloodstock previously used for breeding in New Zealand
Stallion
(1)
For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a stallion to which section EC 41 does not apply is 20% of its cost price.
Broodmare when first used on or after 1 April 2001
(2)
For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a broodmare to which section EC 39(2) applies and section EC 41 does not apply is calculated using the formula—
cost price of broodmare ÷ (9 − age of broodmare).
Definition of item in formula
(3)
In the formula, age of broodmare is—
(a)
8 years of age; or
(b)
the actual age in years, for a broodmare that is 7 years of age or less at the end of the income year.
Relationship with section EZ 6
(4)
This section is overridden by section EZ 6 (Reduction: broodmare previously used for breeding in New Zealand: pre-1 August 2006).
Defined in this Act: bloodstock, broodmare, cost price, income year, stallion, year
Compare: 2004 No 35 s EC 42
EC 43 Accident, birth deformity, or infertility
When this section applies
(1)
This section applies when a person has bloodstock on hand at the end of an income year whose market value is, because of accident, birth deformity, or infertility, less than 50% of what its market value would have been if the accident, birth deformity, or infertility had not occurred.
Value
(2)
The person may value the bloodstock at its market value.
Later income years
(3)
If the person applies subsection (2), the closing value of the bloodstock in later income years is its market value in the applicable income year.
Defined in this Act: bloodstock, income year
Compare: 2004 No 35 s EC 43
EC 44 Other bloodstock
If sections EC 39 to EC 43 do not apply, the closing value of the bloodstock is its cost price.
Defined in this Act: bloodstock, cost price
Compare: 2004 No 35 s EC 44
EC 45 Residual value of bloodstock
If the closing value of any bloodstock would be less than $1 in the absence of this section, the closing value is $1.
Defined in this Act: bloodstock
Compare: 2004 No 35 s EC 45
EC 46 Use of bloodstock for racing
General treatment
(1)
If in an income year a bloodstock owner uses bloodstock for racing, and they are in the business of breeding bloodstock for sale or exchange, the use of the bloodstock for racing is treated as use in the course of the business.
Bloodstock not used in business
(2)
If bloodstock used in an income year for racing is not actually used in the course of a business of breeding bloodstock for sale or exchange, the bloodstock owner may apply to the Commissioner to have the use of the bloodstock treated other than under subsection (1).
Non-breeding bloodstock
(3)
If a bloodstock owner expects that bloodstock will not be able to be used for future breeding, the use in an income year of the bloodstock for racing is not treated as use in the course of a business of breeding bloodstock for sale or exchange. However, if the bloodstock owner uses the bloodstock in the course of their business of breeding bloodstock for sale or exchange, they may apply to the Commissioner to have the use of the bloodstock treated as use in the course of the business.
Application to Commissioner
(4)
The application must be made with the supporting information that the Commissioner requires within 1 month after the day on which the bloodstock is first prepared for racing by the bloodstock owner or the day on which it is first raced by the bloodstock owner, whichever is earlier.
Defined in this Act: apply, bloodstock, business, Commissioner, income year
Compare: 2004 No 35 s EC 46
Section EC 46(1): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 46(2): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 46(3): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 46(4): amended, on 2 June 2016, by section 14(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EC 46 list of defined terms apply: inserted, on 2 June 2016, by section 14(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EC 47 Change of use of bloodstock in course of business
Use outside business
(1)
If a bloodstock owner who is in the business of breeding bloodstock for sale or exchange starts to use bloodstock other than in the course of the business, they are treated as having disposed of the bloodstock. The disposal is treated as having occurred at market value on the day on which they changed the use of the bloodstock.
Use in business
(2)
If a bloodstock owner who is in the business of breeding bloodstock for sale or exchange has been using bloodstock for other purposes, and they start to use the bloodstock in the course of the business, the bloodstock is treated as having been acquired by the bloodstock owner. The acquisition is treated as having occurred at market value on the day on which the bloodstock owner changed the use of the bloodstock.
Defined in this Act: bloodstock, business
Compare: 2004 No 35 s EC 47
Section EC 47(1): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 47(2): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EC 47B Removal of high-priced bloodstock from New Zealand after earlier deductions
When this section applies
(1)
This section applies when—
(a)
high-priced bloodstock is removed from New Zealand before being—
(i)
first raced in New Zealand:
(ii)
used for breeding in New Zealand; and
(b)
a person who is a prospective bloodstock breeder has been allowed a deduction in relation to the high-priced bloodstock.
Treatment as disposal
(2)
The person is treated as having disposed of the high-priced bloodstock.
Defined in this Act: deduction, high-priced bloodstock, New Zealand, prospective bloodstock breeder
Section EC 47B: inserted (with effect on 1 January 2019), on 18 March 2019, by section 162(1) (and see section 162(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EC 47C When prospective breeders treated as being in breeding business
Prospective breeders treated as being in breeding business
(1)
A prospective bloodstock breeder is treated as having, and carrying on, a bloodstock breeding business on and from the day on which the prospective bloodstock breeder acquires stud-founding bloodstock until the earliest of the following days:
(a)
the day on which the prospective bloodstock breeder commences a bloodstock breeding business using the stud-founding bloodstock:
(b)
the day on which the prospective bloodstock breeder is treated as having disposed of the stud-founding bloodstock under section EC 47(1):
(c)
the day on which the prospective bloodstock breeder is treated as having disposed of the stud-founding bloodstock under section EC 47B:
(d)
the day on which the prospective bloodstock breeder is treated as having disposed of the stud-founding bloodstock under section EC 47D:
(e)
the day on which the prospective bloodstock breeder commences a bloodstock breeding business using bloodstock that are not stud-founding bloodstock, if the Commissioner has approved an application under section EC 47E for the stud-founding bloodstock to be treated as being used in the course of the business.
Other bloodstock not part of breeding business
(2)
Despite subsection (1), if the prospective bloodstock breeder owns bloodstock that are not stud-founding bloodstock during the period of time described in that subsection, those bloodstock are not treated as part of the prospective bloodstock breeder’s bloodstock breeding business.
Defined in this Act: bloodstock, business, Commissioner, prospective bloodstock breeder, stud-founding bloodstock
Section EC 47C: inserted (with effect on 1 January 2019), on 18 March 2019, by section 162(1) (and see section 162(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EC 47D Change of prospective bloodstock breeders’ expectation or intention after earlier deductions
When this section applies
(1)
This section applies when—
(a)
a person owns high-priced bloodstock that they acquired as a prospective bloodstock breeder; and
(b)
the person has been allowed a deduction in relation to the high-priced bloodstock; and
(c)
the person has not used the high-priced bloodstock for breeding bloodstock in New Zealand for profit; and
(d)
the person—
(i)
no longer expects that the high-priced bloodstock will be able to be used for future breeding:
(ii)
no longer intends to use the high-priced bloodstock for breeding bloodstock in New Zealand for profit.
Treatment as disposal at market value
(2)
The person is treated as having disposed of the high-priced bloodstock. The disposal is treated as having occurred at the high-priced bloodstock’s market value on the day on which the person’s expectation or intention first changed.
Defined in this Act: deduction, high-priced bloodstock, prospective bloodstock breeder
Section EC 47D: inserted (with effect on 1 January 2019), on 18 March 2019, by section 162(1) (and see section 162(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EC 47E Prospective breeders commencing actual breeding businesses
When this section applies
(1)
This section applies when, ignoring section EC 47C, a bloodstock owner commences a bloodstock breeding business using bloodstock that are not stud-founding bloodstock.
Stud-founding bloodstock subsumed into breeding business
(2)
If the bloodstock owner owns stud-founding bloodstock they acquired as a prospective bloodstock breeder, they may apply to the Commissioner to have the stud-founding bloodstock treated as being used in the course of the business.
Application to Commissioner
(3)
The application must be made with the supporting information that the Commissioner requires within 1 month after the day on which the business commenced.
Effect of application being approved
(4)
If the Commissioner approves the application, sections CG 8B (Recoveries after deductions for high-priced bloodstock removed from New Zealand), CG 8C (Recoveries after deductions for high-priced bloodstock disposed of to non-residents), and EC 47B to EC 47D are, from the date on which the business commenced, treated as not applying in relation to the bloodstock owner and the stud-founding bloodstock.
Defined in this Act: apply, bloodstock, business, Commissioner, prospective bloodstock breeder, stud-founding bloodstock
Section EC 47E: inserted (with effect on 1 January 2019), on 18 March 2019, by section 162(1) (and see section 162(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EC 48 Replacement breeding stock
When this section applies
(1)
This section applies when—
(a)
a bloodstock owner—
(i)
disposes of bloodstock (the breeding stock) that they had previously used for breeding in the course of a business of breeding bloodstock for sale or exchange; and
(ii)
acquires replacement bloodstock (the replacement breeding stock) within the time limits set out in subsections (6) and (7); or
(b)
a bloodstock owner—
(i)
receives a payment of insurance, indemnity, or compensation for the loss or death of, or permanent injury to, breeding stock that they had previously used for breeding in the course of a business of breeding bloodstock for sale or exchange or that they had acquired for use in the business; and
(ii)
acquires replacement breeding stock within the time limits set out in subsections (6) and (7).
Amount determined
(2)
The bloodstock owner may apply to the Commissioner to determine the amount that the bloodstock owner has applied in acquiring replacement breeding stock.
Maximum amount
(3)
The amount must not be more than the net gain calculated using the formula—
gross proceeds − value of breeding stock.
Definition of items in formula
(4)
In the formula,—
(a)
gross proceeds is—
(i)
the amount of the proceeds of disposing of the breeding stock; or
(ii)
the amount paid by way of insurance, indemnity, or compensation for the breeding stock:
(b)
value of breeding stock is the closing value of the breeding stock in the income year before the breeding stock was disposed of or was lost or died or was permanently injured.
Reduction in income
(5)
The bloodstock owner may reduce their income by the amount determined under subsection (2). If they reduce their income in this way, they must also reduce the cost of the replacement breeding stock by the same amount.
Time limit
(6)
Replacement breeding stock must be acquired within 6 months after the end of the income year in which the amount determined under subsection (2) would otherwise be income or, if the Commissioner approves in a case or in a class of cases, a longer period.
Delay in replacing breeding stock
(7)
In the case of lost, dead, or permanently injured breeding stock, the Commissioner may extend the time limit under subsection (6). However, valid commercial reasons must exist for the delay in replacing the breeding stock and the replacement breeding stock must have been acquired before the end of the second income year following the income year in which the loss, death, or permanent injury occurred.
Application to Commissioner
(8)
An application under subsection (2) must be made within the relevant time limits described in subsections (6) and (7). The application must relate only to replacement breeding stock acquired before the application is made.
Defined in this Act: amount, apply, bloodstock, business, Commissioner, income, income year, pay
Compare: 2004 No 35 s EC 48
Section EC 48(1)(a)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 48(1)(a)(ii): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 48(1)(b)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 48(1)(b)(ii): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 48(2): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 48(8): amended, on 2 June 2016, by section 15(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EC 48(8): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EC 48 list of defined terms apply: inserted, on 2 June 2016, by section 15(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Subpart ED—Valuation of excepted financial arrangements
Contents
ED 1 Valuation of excepted financial arrangements
Valuation methods for excepted financial arrangements
(1)
A person who has revenue account property that is an excepted financial arrangement must determine the value of the arrangement at the end of each income year at cost.
Valuation method for right to acquire share under share-lending arrangement
(2)
Despite subsection (1), a share supplier’s share-lending right has the value at the end of each income year that is equal to the amount described in subsection (4).
Valuation method for share acquired by share supplier under share-lending arrangement
(3)
Despite subsection (1), the original share or an identical share acquired by a share supplier from a share user under a share-lending arrangement has the value at the end of each income year that is equal to the amount described in subsection (4).
Amount
(4)
For subsections (2) and (3), the amount is the value of the original share at cost, determined by applying this section to the share immediately before the share supplier’s disposal of the share under the relevant share-lending arrangement.
Valuation when disposal of shares acquired under taxable bonus issue
(4B)
Despite subsection (1), a share that a person acquires under a taxable bonus issue is valued immediately before the person disposes of the share at an amount equal to the amount of the dividend derived by the person from the issue of the share, not including the amount of imputation credits attached to the dividend by the issuer of the share and withholding tax withheld by the issuer of the share.
Cost-flow methods
(5)
The person must use 1 of the following cost-flow methods to allocate costs:
(a)
the first-in first-out cost method; or
(b)
the weighted average cost method.
Certain emissions units not pooled with other types of emissions unit
(5B)
No emissions unit described in 1 of the following paragraphs may be pooled for the purposes of subsection (5) with an emissions unit described in another of the paragraphs:
(a)
pre-1990 forest land emissions units relating to pre-1990 forest land, if the holder of the units would derive income, other than exempt income and excluded income, from a disposal of the land without timber:
(b)
post-1989 forest land emissions units:
(bb)
forest sink emissions units:
(c)
replacement forest land emissions units:
(cb)
fishing quota emissions units, if the holder of the units would derive income, other than exempt income and excluded income, from a disposal of the individual transferable quota to which the units relate:
(d)
pre-1990 forest land emissions units relating to pre-1990 forest land, if the holder of the units would derive no income other than exempt income and excluded income from a disposal of the land without timber:
(db)
fishing quota emissions units, if the holder of the units would derive no income, other than exempt income and excluded income, from a disposal of the individual transferable quota to which the units relate:
(e)
emissions units issued for no consideration—
(i)
to which section ED 1B applies; and
(ii)
that have not been assigned a cost under section ED 1B(3)(a).
Exceptions: types of emissions units pooled with other types
(5C)
Despite subsection (5B), for the purposes of subsection (5),—
(a)
emissions units described in paragraphs (a) to (cb) may be pooled together:
(b)
emissions units described in paragraphs (d) and (db) may be pooled together.
Persons complying with generally accepted accounting practice
(6)
A person who complies with generally accepted accounting practice must comply with the consistency and disclosure requirements of NZIAS 8 or an equivalent standard issued in its place.
Other persons
(7)
A person who does not comply with generally accepted accounting practice—
(a)
must be consistent from 1 income year to the next in their choice of 1 of the cost-flow methods described in subsection (5); and
(b)
may change their cost-flow method if—
(i)
the change is justified by sound commercial reasons and for this purpose, the advancement, deferral, or reduction of an income tax liability is not a sound commercial reason; or
(ii)
the change is required by another provision in this subpart; and
(c)
must keep sufficient details of any such change, and the reasons for it, under section 22 of the Tax Administration Act 1994.
Valuation of emissions units issued for zero price
(7B)
Despite subsection (1),—
(a)
an emissions unit transferred under Part 4, subpart 2, of the Climate Change Response Act 2002 in an income year for no payment of a price, and to which section ED 1B does not apply, has a value of zero for the period beginning with the transfer and ending before the end of the income year:
(b)
a forest land emissions unit has a value of zero at the end of each income year:
(c)
a replacement forest land emissions unit has a value of zero at the end of each income year:
(cb)
a fishing quota emissions unit has a value at the end of each income year of—
(i)
the market value of the unit at the end of the income year, if the holder of the unit would derive income, other than exempt income and excluded income, from a disposal of the individual transferable quota to which the units relate; or
(ii)
zero, if subparagraph (i) does not apply:
(d)
an emissions unit to which section ED 1B applies has the value at the end of each income year that is given by that section.
Worthless arrangements
(8)
If an excepted financial arrangement has no present or likely future market value and has been written off as worthless, its closing value is zero.
Closing value for replacement ETS unit[Repealed]
(8B)
[Repealed]Use of value
(9)
The value determined under this section is—
(a)
the closing value of the excepted financial arrangement for the purposes of section CH 1 (Adjustment for closing values of trading stock, livestock, and excepted financial arrangements); and
(b)
the opening value of the excepted financial arrangement for the next income year for the purposes of section DB 49 (Adjustment for opening values of trading stock, livestock, and excepted financial arrangements).
Defined in this Act: emissions unit, excepted financial arrangement, excluded income, exempt income, fishing quota emissions unit, forest land emissions unit, forest sink emissions unit, generally accepted accounting practice, identical share, income tax liability, income year, NZIAS 8, original share, pay, post-1989 forest land emissions unit, pre-1990 forest land, pre-1990 forest land emissions unit, replacement forest land emissions unit, revenue account property, share-lending arrangement, share-lending right, share supplier, share user
Compare: 2004 No 35 s ED 1
Section ED 1(4B) heading: inserted, on 30 March 2017 (applying for shares received under taxable bonus issues made on or after this date), by section 57(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section ED 1(4B): inserted, on 30 March 2017 (applying for shares received under taxable bonus issues made on or after this date), by section 57(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section ED 1(5B) heading: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1(5B): inserted (with effect on 1 January 2009), on 6 October 2009, pursuant to section 115(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1(5B)(bb): inserted (with effect on 1 January 2009), on 7 September 2010, by section 28(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section ED 1(5B)(cb): inserted (with effect on 1 July 2010), on 7 September 2010, by section 28(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section ED 1(5B)(db): inserted (with effect on 1 July 2010), on 7 September 2010, by section 28(3) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section ED 1(5C) heading: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1(5C): substituted (with effect on 1 July 2010), on 7 September 2010, by section 28(4) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section ED 1(6): amended, on 1 April 2008, by section 355(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section ED 1(7B) heading: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1(7B): inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1(7B)(a): substituted (with effect on 1 July 2010), on 21 December 2010, by section 47(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section ED 1(7B)(a): amended (with effect on 1 July 2010), on 2 November 2012, by section 31 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1(7B)(cb): inserted (with effect on 1 July 2010), on 21 December 2010, by section 47(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section ED 1(8B) heading: repealed (with effect on 1 January 2009), on 6 October 2009, pursuant to section 115(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1(8B): repealed (with effect on 1 January 2009), on 6 October 2009, by section 115(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms emissions unit: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms excluded income: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms exempt income: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms fishing quota emissions unit: inserted (with effect on 1 July 2010), on 7 September 2010, by section 28(5)(a) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section ED 1 list of defined terms forest land emissions unit: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms forest sink emissions unit: inserted (with effect on 1 January 2009), on 7 September 2010, by section 28(5)(b) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section ED 1 list of defined terms NZIAS 8: amended, on 1 April 2008, by section 355(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section ED 1 list of defined terms pay: inserted (with effect on 1 July 2010), on 21 December 2010, by section 47(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section ED 1 list of defined terms post-1989 forest land emissions unit: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms pre-1990 forest land: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms pre-1990 forest land emissions unit: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms replacement ETS unit: repealed (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(a) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section ED 1 list of defined terms replacement forest land emissions unit: inserted (with effect on 1 January 2009), on 6 October 2009, by section 115(4)(b) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
ED 1B Valuation of emissions units issued for zero price
What this section applies to
(1)
This section applies to emissions units held by a person in an income year that—
(a)
are transferred to the person at a price of zero—
(i)
under sections 80 to 86F of the Climate Change Response Act 2002:
(ii)
under section 64 of the Climate Change Response Act 2002 for a removal activity listed in Schedule 4, Part 2 of that Act:
(iii)
by a public authority under a supplementary agreement to a negotiated greenhouse agreement:
(iv)
by a public authority as a rebate, under a negotiated greenhouse agreement, for an indirect emissions charge; and
(b)
have been held continuously by the person from the time of the transfer; and
(c)
have not been valued under either of subsections (4)(a) and (8)(a) before the income year; and
(d)
[Repealed](e)
[Repealed](f)
[Repealed]Value of units transferred to person if no earlier emissions unit shortfall year
(2)
If an emissions unit is transferred to the person in the income year and there is no earlier income year that is an emissions unit shortfall year for the person under subsections (9) and (10), the emissions unit is assigned a value of zero at the time of the transfer.
Value of units transferred to person in income year after emissions unit shortfall year
(3)
If an earlier income year is an emissions unit shortfall year for the person immediately before an emissions unit (the transferred unit) is transferred to the person in the income year, the value of the transferred unit at the time of the transfer is given by the application of the paragraphs in subsection (4) in alphabetical order to transferred units until all the transferred units are assigned a value.
Valuation method at transfer for transferred units
(4)
If emissions units are transferred to the person in an income year when there is a unit shortfall under subsections (9) and (10) for an earlier emissions unit shortfall year,—
(a)
for each emissions unit shortfall year in date order, transferred units, up to the number corresponding to the unit shortfall relating to the emissions unit shortfall year, are each assigned a value equal to the market value of an emissions unit at the end of the emissions unit shortfall year:
(b)
transferred units are each assigned a value equal to zero.
Value of units with zero value immediately before end of income year
(5)
If the value of an emissions unit (the revalued unit) held by the person immediately before the end of the income year is zero, the value of the revalued unit at the end of the year is given by the application of the paragraphs in subsection (8) in alphabetical order to revalued units until all the revalued units are assigned a value.
Limit on application of subsection (8)(a)
(6)
The maximum number of units valued under subsection (8)(a) for the income year is the greater of zero and the number calculated using the formula—
unit entitlement − disposals at zero value.
Definition of items in formula
(7)
In the formula,—
(a)
unit entitlement is the total for the income year of amounts, each of which the person would have for the period of overlap between a calendar year ending 31 December and the income year if the period of overlap were treated as a year, of—
(i)
final allocation entitlement under section 83 of the Climate Change Response Act 2002:
(ii)
allocation entitlement under section 85 of that Act:
(iii)
allocation entitlement under section 64 of the Climate Change Response Act 2002 for a removal activity listed in Schedule 4, Part 2 of that Act:
(iv)
emissions units corresponding to the actual emissions amount under a supplementary agreement to a negotiated greenhouse agreement:
(v)
emissions units corresponding to a rebate, under a negotiated greenhouse agreement, for an indirect emissions charge:
(b)
disposals at zero value is the number of emissions units disposed of by the person in the income year that had a value of zero at the disposal.
Valuation method at end of income year for revalued units
(8)
If the person holds revalued units immediately before the end of the income year, the units are each assigned a value—
(a)
equal to the market value of an emissions unit at the end of the income year:
(b)
equal to zero.
Emissions unit shortfall year
(9)
If the number of units assigned a market value for an income year under subsection (8)(a) is less than the maximum number given by subsection (6) for the income year, at the end of the income year—
(a)
the income year is an emissions unit shortfall year and has 2 numbers (the unit shortfall and the unit shortfall value) associated with it:
(b)
the unit shortfall relating to the emissions unit shortfall year is the difference between the maximum number given by subsection (6) for the income year and the number of zero value units assigned a market value under subsection (8)(a) for the income year:
(c)
the unit shortfall value relating to the emissions unit shortfall year is the unit shortfall multiplied by the market value of an emissions unit at the end of the income year.
Reductions in unit shortfall and unit shortfall value
(10)
When an emissions unit held by a person is assigned a value under subsection (4)(a) in relation to a year that is an emissions unit shortfall year for the person,—
(a)
the unit shortfall relating to that year is reduced by the number of emissions units assigned a value in relation to that year:
(b)
the unit shortfall value relating to that year is reduced by an amount equal to the number of emissions units assigned a value in relation to that year multiplied by the value assigned to each of those emissions units:
(c)
the year ceases to be an emissions unit shortfall year, if the unit shortfall relating to the year is reduced to zero.
Unit shortfall values treated as values of additional emissions units for purposes of adjustments
(11)
For the purposes of sections CH 1 and DB 49 (which relate to adjustments for values of excepted financial arrangements), the person is treated as holding at the end of the income year additional emissions units with a value equal to the total of the unit shortfall values relating to emissions unit shortfall years for the person.
Defined in this Act: amount, emissions unit, emissions unit shortfall year, fishing quota emissions units, forest land emissions units, income year, public authority, replacement forest land emissions units, year
Section ED 1B: substituted (with effect on 1 July 2010), on 21 December 2010, by section 48 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section ED 1B(1)(a)(i): replaced (with effect on 1 July 2010), on 2 November 2012, by section 32(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(1)(a)(ii): replaced (with effect on 1 July 2010), on 2 November 2012, by section 32(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(1)(a)(iii): inserted (with effect on 1 July 2010), on 2 November 2012, by section 32(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(1)(a)(iv): inserted (with effect on 1 July 2010), on 2 November 2012, by section 32(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(1)(d): repealed (with effect on 1 July 2010), on 2 November 2012, by section 32(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(1)(e): repealed (with effect on 1 July 2010), on 2 November 2012, by section 32(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(1)(f): repealed (with effect on 1 July 2010), on 2 November 2012, by section 32(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(7)(a)(iii): replaced (with effect on 1 July 2010), on 2 November 2012, by section 32(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(7)(a)(iv): inserted (with effect on 1 July 2010), on 2 November 2012, by section 32(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 1B(7)(a)(v): inserted (with effect on 1 July 2010), on 2 November 2012, by section 32(3) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
ED 2 Transfers of certain excepted financial arrangements within wholly-owned groups
When this section applies
(1)
This section applies when—
(a)
a company that is part of a wholly-owned group of companies (company A) transfers to another company in the same group (company B) an excepted financial arrangement that is revenue account property of company A; and
(b)
the transfer of the excepted financial arrangement is not made under a share-lending arrangement; and
(c)
both companies are resident in New Zealand on the date of the transfer; and
(d)
the market value of the excepted financial arrangement on the date of the transfer is less than its cost to company A.
Transfer at cost
(2)
The consideration for the transfer is treated as being equal to the cost of the excepted financial arrangement to company A.
Company stops being part of group
(3)
If company B stops being part of the wholly-owned group, the company is treated as disposing of and reacquiring the excepted financial arrangement at its market value at the time the company stops being part of the group.
Not dividend
(4)
A transfer of an excepted financial arrangement to which this section applies does not give rise to a dividend.
Defined in this Act: company, dividend, excepted financial arrangement, resident in New Zealand, revenue account property, wholly-owned group of companies
Compare: 2004 No 35 s ED 2
ED 2B Transfers to shareholders by ASX-listed Australian company of shares in subsidiary
When this section applies
(1)
This section applies when—
(a)
a company (the splitting company) is an ASX-listed Australian company under subsection (8); and
(b)
shares in a company (the subsidiary) that is a member of the same group of companies as the splitting company (the group), are issued or transferred (the share transfer) to—
(i)
shareholders of the splitting company or of a company that is a member of the group:
(ii)
a member of the group; and
(c)
the subsidiary is a member of the group immediately before the share transfer; and
(d)
the share transfer is not a payment of assessable income or exempt income under the Income Tax Assessment Act 1936 (Aust).
(2)
[Repealed]Cost of shares in splitting company after transfer
(3)
The cost for a shareholder of the shares in the splitting company that are held by the shareholder after the share transfer is the amount calculated using the formula—
cost before transfer × value after transfer ÷ (value acquired shares + value after transfer).
Cost of shares in new company
(4)
The cost for a shareholder of the shares acquired in the share transfer is the amount calculated using the formula—
cost before transfer × value acquired shares ÷ (value acquired shares + value after transfer).
Definition of items in formulas
(5)
In the formulas in subsections (3) and (4),—
(a)
cost before transfer is the cost for the shareholder, immediately before the share transfer, of the shares in the splitting company held by the shareholder immediately after the share transfer:
(b)
value after transfer is the market value of the shares in the splitting company held by the shareholder immediately after the share transfer:
(c)
value acquired shares is the market value of the shares in the subsidiary held by the shareholder immediately after the share transfer.
Available subscribed capital amounts
(6)
Immediately after the share transfer, the available subscribed capital,—
(a)
for each share held in the subsidiary, is—
(i)
the amount given by section CD 43 (Available subscribed capital (ASC) amount) for the share; or
(ii)
zero, if it is impractical to recognise an amount of available subscribed capital for the shares held in the subsidiary:
(b)
for the shares held in the splitting company, equals the amount of the available subscribed capital for the shares in the splitting company held immediately before the share transfer, reduced by the total amount given by paragraph (a) for the shares held in the subsidiary immediately after the share transfer.
Not dividend
(7)
The transfer of the shares in the subsidiary to the shareholders in the splitting company is not a dividend.
Meaning of ASX-listed Australian company
(8)
ASX-listed Australian company means a company that—
(a)
is resident in Australia; and
(b)
is treated as resident in no tax jurisdiction other than Australia under each agreement that—
(i)
is between Australia and another tax jurisdiction; and
(ii)
would be a double tax agreement if negotiated between New Zealand and the other tax jurisdiction; and
(c)
is included on the official list of ASX Limited, a market licensee under Chapter 7 of the Corporations Act 2001 (Aust); and
(d)
is not an entity described in schedule 25, part B (Foreign investment funds); and
(e)
is required under the Income Tax Assessment Act 1997 (Aust) and Income Tax Assessment Act 1936 (Aust) to maintain a franking account.
Defined in this Act: amount, ASX-listed Australian company, available subscribed capital, company, dividend, double tax agreement, group of companies, market value, resident in Australia, share, shareholder
Section ED 2B: inserted, on 29 March 2018 (with effect on 1 April 2016 and applying for the 2016–17 and later income years), by section 65(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section ED 2B(1)(b): replaced (with effect on 1 April 2016), on 18 March 2019, by section 163(1) (and see section 163(4) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section ED 2B(1)(c): replaced (with effect on 1 April 2016), on 18 March 2019, by section 163(1) (and see section 163(4) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section ED 2B(2): repealed (with effect on 1 April 2016), on 18 March 2019, by section 163(2) (and see section 163(4) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section ED 2B(8)(c): replaced, on 29 March 2018 (with effect on 1 April 2017 and applying for the 2017–18 and later income years), by section 65(2) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section ED 2B list of defined terms group of companies: inserted (with effect on 1 April 2016), on 18 March 2019, by section 163(3) (and see section 163(4) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
ED 3 Part-year tax calculations for transfers: general insurance OCR
When this section applies
(1)
This section applies when a person (the transferor) transfers general insurance contracts to another person (the transferee) in an income year and sections CR 4 and DW 4 (which relate to outstanding claims reserves) apply to either or both of the transferor and transferee.
Transfer from non-resident
(1B)
If sections CR 4 and DW 4 apply to the transferee and not to the transferor, the transferee—
(a)
does the calculations that the transferor would be required to perform under this section if sections CR 4 and DW 4 applied to the transferor; and
(b)
uses the results of the calculations in the way required under this section for a transferee.
Part-year calculations for transfers
(2)
A transferor to whom sections CR 4 and DW 4 apply does a part-year calculation immediately before the transfer, as described in subsection (3), for the transferred general insurance contracts, but only for their part-year ending on the day the transfer occurs. A transferee to whom sections CR 4 and DW 4 apply also does a part-year calculation for the transferred contracts, as described in subsection (3), but only for their part-year starting on the day the transfer occurs. The transferee’s relevant opening outstanding claims reserve amounts equal the transferor’s relevant closing outstanding claims reserve amounts immediately before the transfer, but if the reinsurance associated with transferred policies is not assigned by the transferor to the transferee, the transferee’s reserve amounts are calculated without subtracting relevant reinsurance amounts.
Part-year calculations for transfers: description
(3)
For calculating their income tax liability for the tax year that corresponds to the income year, the transferor and transferee treat references, in sections CR 4 and DW 4 and in the rules for life insurers, to an income year or a tax year as if they are references to 2 separate tax years and corresponding income years (the part-years) within that tax year.
Part-year calculations for transfers: effect
(4)
Transferor’s and transferee’s part-year calculations may give rise to income and deductions for the income year, but they do not create any part-year tax return obligations.
Defined in this Act: amount, deduction, general insurance, IFRS 4, income, income tax liability, income year, insurer, outstanding claims reserve, pay, tax year
Section ED 3: inserted (with effect on 7 September 2010), on 2 November 2012, by section 33(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section ED 3(1): replaced, on 1 April 2014, by section 47(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section ED 3(1B) heading: inserted, on 1 April 2014, by section 47(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section ED 3(1B): inserted, on 1 April 2014, by section 47(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section ED 3(2): amended, on 1 April 2014, by section 47(3)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section ED 3(2): amended, on 1 April 2014, by section 47(3)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section ED 3(3): amended (with effect on 2 November 2012), on 30 March 2021, by section 34 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
ED 4 Valuation of certain excepted financial arrangements denominated in foreign currency
Who this section applies to
(1)
This section applies to a person who, in an income year (the current year),—
(a)
has an excepted financial arrangement, of a type (the arrangement type) described in section EW 5(21) to (25) (What is an excepted financial arrangement?), denominated in a foreign currency; and
(b)
has an amount of foreign currency payable or receivable under the excepted financial arrangement (a foreign currency payment) at the end of the current year.
Person may choose valuation timing used for financial statements
(2)
The person may choose to value a foreign currency payment at the close of trading spot exchange rate applicable at the end of the current year, if the person, in preparing financial statements, determines values at the end of the income year for amounts of foreign currency payable or receivable by the person.
Consistent valuation timing for excepted financial arrangement
(3)
If foreign currency payments under a person’s excepted financial arrangement are valued under subsection (2) for an income year, the amounts of foreign currency payable or receivable under all of the person’s excepted financial arrangements of the arrangement type are valued in the same way for the income year and later income years.
Defined in this Act: amount, close of trading spot exchange rate, excepted financial arrangement, financial arrangement, income year
Section ED 4: inserted (with effect on 27 September 2012 and applying for a person and an excepted financial arrangement on and after that date, except if the person takes a tax position for the excepted financial arrangement, relying on an election made under section EW 8 before its amendment by the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013, in a return of income received by the Commissioner before that date or under a determination or binding ruling made by the Commissioner before that date), on 17 July 2013, by section 45(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Subpart EE—Depreciation
Contents
Introductory provision
EE 1 What this subpart does
Quantifying amounts of depreciation loss and depreciation recovery income
(1)
When amount of depreciation loss arises
(2)
A person has an amount of depreciation loss for an item for an income year if—
(a)
the person owns an item of property, as described in sections EE 2 to EE 5; and
(b)
the item is depreciable property, as described in sections EE 6 to EE 8; and
(c)
the item is used, or is available for use, by the person in the income year; and
(d)
the amount of depreciation loss is calculated for the person, the item, and the income year under sections EE 9 to EE 11.
When amount of depreciation recovery income arises
(3)
A person has an amount of depreciation recovery income for an item for an income year if—
(a)
the person owns an item of property, as described in sections EE 2 to EE 5; and
(b)
the item is depreciable property, as described in sections EE 6 to EE 8; and
(c)
the item is disposed of or an event of a kind described in section EE 47 or EE 52 occurs; and
(d)
the amount of depreciation recovery income is calculated for the person, the item, and the income year under any of sections EE 22(5), EE 38(5), EE 48(1), EE 49(2), EE 51(3), EE 52(3), EZ 23B, and EZ 23BB (which relate to property, and interests in property, acquired after depreciable property was affected by the Canterbury earthquakes).
Amounts of loss incurred and income derived
(4)
To avoid doubt,—
(a)
an amount of depreciation loss is treated as being incurred in the income year for which it is calculated; and
(b)
an amount of depreciation recovery income is treated as being derived in the income year for which it is calculated.
Allocation of deduction for depreciation loss
(5)
A person who in an income year uses an item for research or development or for market development that gives rise to a deduction allocated under section EJ 22 (Deductions for market development: product of research, development), and as a result has an amount of depreciation loss for the item for the income year, may choose to allocate all or part of the deduction for the depreciation loss—
(a)
to an income year after the income year for which the person has the depreciation loss; and
(b)
in the way required by section EJ 23 (Allocation of deductions for research, development, and resulting market development).
Partial income-producing use
(6)
Subpart DE (Motor vehicle expenditure) and section EE 50 contain rules for calculating the amount of deduction available for depreciation loss in circumstances in which an item of property is only partly used or available for use in a way that satisfies the general permission.
Defined in this Act: amount, deduction, depreciable property, depreciation loss, depreciation recovery income, development, dispose, general permission, income, income year, own, property, research
Compare: 2004 No 35 s EE 1
Section EE 1(3)(c): amended, on 30 March 2017, by section 58 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 1(3)(d): amended (with effect on 4 September 2010), on 27 February 2014, by section 48 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section EE 1(3)(d): amended (with effect on 4 September 2010), on 29 August 2011, by section 23 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Meaning of own
EE 2 Nature of ownership of item
Kinds of ownership
(1)
Own, for the ownership of depreciable property,—
(a)
means legal or equitable ownership; and
(b)
includes ownership of the kinds described in sections EE 3 to EE 5.
Shared ownership
(2)
When more than 1 person owns an item of depreciable property, own means the interest that the person has in the item.
Defined in this Act: depreciable property, own
Compare: 2004 No 35 s EE 2
EE 3 Ownership of goods subject to reservation of title
When this section applies
(1)
This section applies when—
(a)
a person (the buyer) enters into an unconditional contract to buy an item of depreciable property; and
(b)
the contract is not a hire purchase agreement and the item is not a hire purchase asset that is the subject of a hire purchase agreement; and
(c)
the contract is subject to Part 3, subparts 1 to 6 of the Contract and Commercial Law Act 2017; and
(d)
title to the item does not pass until the purchase price is paid in full; and
(e)
the buyer takes possession of the item before title to it passes.
Buyer treated as owner
(2)
The buyer is treated as owning, and the seller is treated as not owning, the item from the later of the following times:
(a)
the time at which the buyer enters into the contract; and
(b)
the time at which the buyer takes possession of the item.
Buyer ceases to be treated as owner
(3)
Subsection (2) ceases to apply when 1 of the following occurs:
(a)
title to the item passes to the buyer; or
(b)
the seller repossesses the item.
Defined in this Act: depreciable property, hire purchase agreement, hire purchase asset, own
Compare: 2004 No 35 s EE 3
Section EE 3(1)(c): amended, on 1 September 2017, by section 347 of the Contract and Commercial Law Act 2017 (2017 No 5).
EE 4 Ownership of lessee’s improvements: lessee
When this section applies
(1)
This section applies when—
(a)
a lessee of land incurs expenditure during the period during which the land is leased to the lessee in erecting a fixture on the land or making an improvement to the land; and
(b)
the lessor owns the fixture or improvement.
Ownership of fixture or improvement
(2)
The following apply to the ownership of the fixture or improvement:
(a)
in the period during which the land is leased to the lessee,—
(i)
the lessee is treated as owning the fixture or improvement; and
(ii)
the lessor is treated as not owning the fixture or improvement; and
(iii)
a person to whom the lessor disposes of the land during the period is treated as not owning the fixture or improvement; and
(b)
after the period during which the land is leased to the lessee,—
(i)
the lessor is treated as not owning the fixture or improvement, unless the lessor incurs a cost relating to it at the end of the period; and
(ii)
a person to whom the lessor disposes of the land during the period is treated as not owning the fixture or improvement.
Defined in this Act: improvement, lessee, lessor, own
Compare: 2004 No 35 s EE 4
EE 5 Ownership of lessee’s improvements: other person
When this section applies: first case
(1)
This section applies when—
(a)
a lessee of land incurs expenditure during the term of the lease in erecting a fixture on the land or making an improvement to the land; and
(b)
the lessee has been allowed a deduction for an amount of depreciation loss for the fixture or improvement; and
(c)
the lessee disposes of their interest in the lease to another person; and
(d)
the other person pays the lessee for the fixture or improvement.
When this section applies: second case
(2)
This section also applies when—
(a)
a lessee of land has been allowed a deduction for an amount of depreciation loss for a fixture on the land, or an improvement to the land, that a previous lessee erected or made; and
(b)
the lessee disposes of their interest in the lease to another person; and
(c)
the other person pays the lessee for the fixture or improvement.
Other person treated as owner
(3)
The other person is treated as owning the fixture or improvement from the time at which they pay the lessee for it.
Defined in this Act: amount, deduction, depreciation loss, dispose, improvement, lease, lessee, own, pay, term of the lease
Compare: 2004 No 35 s EE 5
Meaning of depreciable property
EE 6 What is depreciable property?
Description
(1)
Depreciable property is property that, in normal circumstances, might reasonably be expected to decline in value while it is used or available for use—
(a)
in deriving assessable income; or
(b)
in carrying on a business for the purpose of deriving assessable income; or
(c)
in deriving exempt income, and it is used in performing research and development activities.
Subsections (2) to (4) expand on this subsection.
Property: tangible
(2)
An item of tangible property is depreciable property if—
(a)
it is described by subsection (1); and
(b)
it is not described by section EE 7.
Property: utilities distribution assets
(2B)
For the purposes of this subpart, utilities distribution assets are separate items of property.
Property: intangible
(3)
An item of intangible property is depreciable property if—
(a)
it is within the definition of depreciable intangible property; and
(b)
it is described by subsection (1); and
(c)
it is not described by section EE 7.
Property: geothermal wells
(4)
For the purposes of this subpart, a person who owns a geothermal well is, for the geothermal energy proving period, treated as acquiring the well as property that declines in value and is to be available for use in carrying on a business for the purpose of deriving assessable income.
Defined in this Act: acquire, assessable income, business, depreciable intangible property, depreciable property, geothermal energy proving period, geothermal well, property, research and development activity, utilities distribution asset
Compare: 2004 No 35 s EE 6
Section EE 6(1)(b): amended, on 1 April 2019, by section 6(1) (and see section 3 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).
Section EE 6(1)(c): inserted, on 1 April 2019, by section 6(1) (and see section 3 for application) of the Taxation (Research and Development Tax Credits) Act 2019 (2019 No 15).
Section EE 6(2B) heading: inserted (with effect on 1 April 2008), on 31 March 2023, by section 50(1) (and see section 50(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section EE 6(2B): inserted (with effect on 1 April 2008), on 31 March 2023, by section 50(1) (and see section 50(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section EE 6 list of defined terms research and development activities: repealed (with effect on 1 April 2019), on 30 March 2022, by section 78 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 6 list of defined terms research and development activity: inserted (with effect on 1 April 2019), on 30 March 2022, by section 78 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 6 list of defined terms utilities distribution asset: inserted (with effect on 1 April 2008), on 31 March 2023, by section 50(2) (and see section 50(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
EE 7 What is not depreciable property?
The following property is not depreciable property:
(a)
land other than depreciable intangible property, although buildings, fixtures, and the improvements listed in schedule 13 (Depreciable land improvements) are depreciable property if they are described by section EE 6(1):
(ab)
a lease of land with a perpetual right of renewal:
(b)
trading stock:
(c)
livestock to which subpart EC (Valuation of livestock) applies:
(d)
financial arrangements:
(e)
excepted financial arrangements other than depreciable intangible property:
(f)
property that will not decline in value, as far as its owner is concerned, because, when they dispose of it, they have a right to be compensated for any decline in its value:
(fb)
property that is a piece of an item of depreciable property that is an aircraft or an aircraft engine, if the expenditure on the piece is treated under section DW 5(8) (Aircraft operators: aircraft engines and aircraft engine overhauls) as being expenditure incurred in carrying out an aircraft engine overhaul:
(fc)
a utilities distribution network, to the extent to which it is treated as an item of property separate from the relevant utilities distribution assets:
(g)
property that its owner chooses, under section EE 8, to treat as not depreciable:
(h)
property that its owner chooses, under section EE 38, to deal with under that section:
(i)
property for whose cost a person other than the property’s owner is allowed a deduction:
(j)
property for whose cost a person is allowed a deduction under a provision of this Act outside this subpart or under a provision of an earlier Act.
Defined in this Act: aircraft engine, aircraft engine overhaul, building, deduction, depreciable intangible property, depreciable property, dispose, excepted financial arrangement, financial arrangement, land, own, property, trading stock, utilities distribution asset, utilities distribution network
Compare: 2004 No 35 s EE 7
Section EE 7(a): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 46(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EE 7(ab): inserted, on 1 April 2015, by section 65(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EE 7(c): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 June 2014, by section 65(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EE 7(e): replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 46(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EE 7(fb): inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 59(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 7(fc): inserted (with effect on 1 April 2008), on 31 March 2023, by section 51(1) (and see section 51(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section EE 7(j): amended, on 29 March 2018 (with effect on 1 April 2014), by section 66 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section EE 7 list of defined terms aircraft engine: inserted, on 1 April 2017, by section 59(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 7 list of defined terms aircraft engine overhaul: inserted, on 1 April 2017, by section 59(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 7 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 7 list of defined terms depreciable intangible property: inserted (with effect on 1 April 2008), on 17 July 2013, by section 46(3) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EE 7 list of defined terms land: inserted (with effect on 1 April 2008), on 17 July 2013, by section 46(3) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EE 7 list of defined terms utilities distribution asset: inserted (with effect on 1 April 2008), on 31 March 2023, by section 51(2) (and see section 51(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section EE 7 list of defined terms utilities distribution network: inserted (with effect on 1 April 2008), on 31 March 2023, by section 51(2) (and see section 51(3) for application) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
EE 8 Election that property not be depreciable
Item acquired
(1)
A person may choose that an item of property they acquire not be depreciable property even though, in the absence of the election, it would be depreciable property.
Item changing use
(2)
A person may choose that an item of property they own ceases to be depreciable property if—
(a)
the use of the item changes; and
(b)
before the use changes, the person was denied a deduction for an amount of depreciation loss for the item; and
(c)
after the use changes, in the absence of the election, the person would have been allowed a deduction for an amount of depreciation loss for the item.
Retrospective election
(3)
A person who has deducted none of the amounts of depreciation loss for which they were allowed a deduction for an item of property, in the income year in which they acquired it and in each later year, may retrospectively choose that the item not be depreciable property.
How elections made
(4)
An election under this section is made as follows:
(a)
a person makes an election under subsection (1) by giving the Commissioner notice of it in their return of income for the income year in which they acquire the item; and
(b)
a person makes an election under subsection (2) by giving the Commissioner notice of it in their return of income for the income year in which the item’s use changes; and
(c)
a person makes an election under subsection (3) by giving the Commissioner notice of it in their return of income for any income year after they acquire the item, including an income year after they dispose of the item.
Effect of election
(5)
An election under this section has effect for the person for—
(a)
the income year for which they make the election; and
(b)
all later income years until—
(i)
the item is disposed of, although this reference to disposal does not include the disposal of an item of intangible property as part of an arrangement to replace it with an item of the same kind; or
(ii)
an event described in section EE 47 occurs involving the item.
Retrospective effect of election
(6)
An election made under subsection (3) also has retrospective effect for the person for—
(a)
the income year in which they acquire the property; and
(b)
all intervening income years until the year in which they make the election.
Defined in this Act: acquire, amount, Commissioner, deduction, depreciable property, depreciation loss, dispose, income year, notice, property, return of income
Compare: 2004 No 35 s EE 8
How amounts of depreciation loss and depreciation recovery income are calculated
EE 9 Description of elements of calculation
Depreciation methods
(1)
Sections EE 12 to EE 24 deal with the methods of calculating an amount of depreciation loss. The methods are—
(a)
the straight-line method, which is dealt with in sections EE 13 to EE 19; and
(b)
the diminishing value method, which is also dealt with in sections EE 13 to EE 19; and
(c)
the pool method, which is dealt with in sections EE 20 to EE 24.
Depreciation rates
(2)
Sections EE 26 to EE 36 deal with the rates of depreciation. The rates are—
(a)
the economic rate, which is dealt with in section EE 26; and
(b)
the annual rate, which is dealt with in sections EE 31, EE 33, and EE 34; and
Improvements, low value items, and items no longer used
(3)
Sections EE 37 to EE 39 deal with the cases of—
(a)
an improvement made to an item of depreciable property; and
(b)
an item of depreciable property that is of low value; and
(c)
an item of depreciable property that is no longer used.
Transfers
(4)
Sections EE 40 to EE 43 deal with the transfer of items of depreciable property in certain amalgamations and between associated persons.
Disposals and similar events
(5)
Sections EE 44 to EE 52 deal with disposals of property and events that involve property and are similar to disposal.
Interpretation provisions
(6)
Sections EE 54 to EE 67 deal with the following interpretation matters:
(a)
section EE 54 deals with the effect of goods and services tax (GST) on cost; and
(b)
sections EE 55 to EE 60 deal with the meaning of adjusted tax value; and
(c)
sections EE 61 to EE 67 contain definitions.
Relationship with sections EZ 9 to EZ 28
(7)
Sections EZ 9 to EZ 28 (which relate to depreciation) deal with items acquired in periods before 24 September 1997.
Defined in this Act: adjusted tax value, amount, annual rate, associated person, depreciable property, depreciation loss, depreciation method, diminishing value method, dispose, economic rate, GST, improvement, pool method, property, provisional rate, special rate, straight-line method
Compare: 2004 No 35 s EE 9
EE 10 Calculation rule: item temporarily not available
An item of depreciable property is treated as being available for use while subject temporarily to repair or inspection, if it was used or available for use immediately before going for repair or inspection.
Defined in this Act: depreciable property
Compare: 2004 No 35 s EE 10
EE 11 Calculation rule: income year in which item disposed of
Generally no amount of depreciation loss
(1)
A person does not have an amount of depreciation loss for an item of depreciable property for the income year in which they dispose of it.
Exclusion: building or petroleum-related depreciable property
(2)
A person has an amount of depreciation loss for an item of depreciable property for the income year in which they dispose of it, if it is—
(a)
a building; or
(b)
an item of petroleum-related depreciable property.
Exclusion: empty pool
(3)
A person has the amount of depreciation loss calculated under section EE 22(4)(a) for an income year for a disposal to which the subsection applies.
Exclusion: consideration less than adjusted tax value
(4)
A person has the amount of depreciation loss calculated under section EE 48(2) for a disposal or event to which the subsection applies.
Exclusion: item partly used for business
(5)
A person has the amount of depreciation loss calculated under section EE 50(6) for a disposal or event to which the subsection applies.
Exclusion: recent acquisition of item partly used for business
(6)
A person has the amount of depreciation loss calculated under section EE 50(9) for a disposal or event to which the subsection applies.
Defined in this Act: building, adjusted tax value, amount, business, depreciable property, depreciation loss, dispose, income year, petroleum-related depreciable property
Compare: 2004 No 35 s EE 11
Section EE 11 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Methods
EE 12 Depreciation methods
Meaning of depreciation method
(1)
Depreciation method means—
(a)
a method that a person may use to calculate an amount of depreciation loss:
(b)
a rate determined by the Commissioner under section 91AAF or 91AAG of the Tax Administration Act 1994:
(c)
a maximum pooling value determined by the Commissioner under section 91AAL of that Act.
Methods described
(2)
The depreciation methods are—
(a)
the diminishing value method, which—
(i)
may be used for any item of depreciable property except one referred to in subparagraph (ii) or (iii); and
(ii)
must not be used for an item of fixed life intangible property; and
(iii)
must not be used for an item of property in the circumstances described in section EZ 9 (Pool method for items accounted for by globo method for 1992–93 income year):
(b)
the straight-line method, which—
(i)
may be used for any item of depreciable property; and
(ii)
must be used for an item of fixed life intangible property:
(c)
the pool method, which—
(i)
may be used for any item of poolable property except one referred to in subparagraph (ii); and
(ii)
must not be used for an item of fixed life intangible property; and
(iii)
must be used for an item of property in the circumstances described in section EZ 9.
Person chooses
(3)
A person chooses which of the depreciation methods they will use for each item of depreciable property they own.
How person chooses
(4)
The person chooses the method by using the chosen method for the item in their return of income for the income year for which they make the election.
Diminishing value or straight-line method fixed for income year
(5)
If the person chooses the diminishing value method or the straight-line method, they must use the method for the item and the income year and must not change the election for the income year.
Pool method fixed for income year and later income years
(6)
If the person chooses the pool method, they must use the method for the item and the income year and must not change the election for—
(a)
the income year; or
(b)
a later income year in which the item is still poolable property that they own.
Defined in this Act: amount, depreciable property, depreciation loss, depreciation method, diminishing value method, fixed life intangible property, income year, own, pool method, poolable property, property, return of income, straight-line method
Compare: 2004 No 35 s EE 12
Amount of depreciation loss under diminishing value method or straight-line method
EE 13 Application of sections EE 14 to EE 19
Sections EE 14 to EE 19 apply to the calculation of the amount of depreciation loss that a person using the diminishing value method or the straight-line method has.
Defined in this Act: amount, depreciation loss, diminishing value method, straight-line method
Compare: 2004 No 35 s EE 13
EE 14 Diminishing value or straight-line method: calculating amount of depreciation loss
Most depreciable property
(1)
The amount of depreciation loss that the person has for an income year for an item of depreciable property is the lesser of the amounts dealt with in sections EE 15 and EE 16.
Exclusion: petroleum-related depreciable property
(2)
The amount of depreciation loss that the person has for an income year for an item of petroleum-related depreciable property is the lesser of the amounts dealt with in sections EE 15 and EE 17.
Defined in this Act: amount, depreciable property, depreciation loss, income year, petroleum-related depreciable property
Compare: 2004 No 35 s EE 14
EE 15 Amount of adjusted tax value
For the purposes of the comparison of amounts required by section EE 14(1) and (2), the amount dealt with in this section is the item’s adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the item for the income year.
Defined in this Act: adjusted tax value, amount, deduction, depreciation loss, income year
Compare: 2004 No 35 s EE 15
EE 16 Amount resulting from standard calculation
Amount
(1)
For the purposes of the comparison of amounts required by section EE 14(1), the amount dealt with in this section is calculated using the formula—
annual rate × value or cost × months ÷ 12.
Definition of items in formula
(2)
The items in the formula are defined in subsections (3) to (5).
Annual rate
(3)
Annual rate is the annual rate that, in the income year, applies to the item of depreciable property under the depreciation method that the person uses for the item. It is expressed as a decimal.
Value or cost
(4)
Value or cost is,—
(a)
when the person uses the diminishing value method, the item’s adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the item for the income year:
(b)
when the person uses the straight-line method,—
(i)
for a patent, design registration, or plant variety rights in relation to which the person has been allowed a deduction for an amount of depreciation loss for the relevant application, the item’s adjusted tax value at the start of the month in which the person acquires it:
(ib)
for a design registration to which subparagraph (i) does not apply, for a design registration application, or for industrial artistic copyright, its cost to the person, but excluding expenditure that the person incurred before 7 November 2013 or for which they are allowed a deduction under a provision of this Act outside this subpart:
(ii)
for other items, its cost to the person excluding expenditure for which the person is allowed a deduction under a provision of this Act outside this subpart:
(c)
for the purposes of paragraph (b), variations to cost are in sections EE 18 to EE 19.
Months: income year of normal length or shorter
(5)
Months, for a person whose income year contains 365 days or fewer, or 366 days or fewer in a leap year, is the lesser of the following:
(a)
12; and
(b)
the number of whole or part calendar months in the income year in which—
(i)
the person owns the item; and
(ii)
the person uses the item or has it available for use for any purpose.
Months: income year of longer than normal length
(6)
Months, for a person whose income year contains more than 365 days, or more than 366 days in a leap year, is the number of whole or part months in the income year in which—
(a)
the person owns the item; and
(b)
the person uses the item or has it available for use for any purpose.
Months: applications
(7)
For the purposes of subsections (5) and (6), for a patent application and a design registration application, months refers to whole calendar months and whole months, as applicable.
Defined in this Act: adjusted tax value, amount, annual rate, deduction, depreciable property, depreciation loss, depreciation method, design registration, design registration application, diminishing value method, income year, industrial artistic copyright, own, plant variety rights, straight-line method
Compare: 2004 No 35 s EE 16
Section EE 16(4)(b)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 116(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 16(4)(b)(ib): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 116(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 16(4)(c): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 116(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 16(7) heading: amended (with effect on 1 April 2015), on 24 February 2016, by section 116(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 16(7): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 116(5) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 16 list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 116(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 16 list of defined terms design registration application: inserted (with effect on 1 April 2015), on 24 February 2016, by section 116(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 16 list of defined terms industrial artistic copyright: inserted (with effect on 1 April 2015), on 24 February 2016, by section 116(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EE 17 Amount resulting from petroleum-related depreciable property calculation
Amount
(1)
For the purposes of the comparison of amounts required by section EE 14(2), the amount dealt with in this section is calculated using the formula—
annual rate × value or cost × days ÷ 365.
Definition of items in formula
(2)
The items in the formula are defined in subsections (3) to (5).
Annual rate
(3)
Annual rate is the annual rate that, in the income year, applies to the item of depreciable property under the depreciation method that the person uses for the item. It is expressed as a decimal.
Value or cost
(4)
Value or cost is,—
(a)
when the person uses the diminishing value method, the item’s adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the item for the income year:
(b)
when the person uses the straight-line method, the item’s cost to the person; a variation to cost is in section EE 18.
Days
(5)
Days is the number of whole or part days in the income year on which—
(a)
the person owns the item; and
(b)
the person uses the item or has it available for use for any purpose.
Defined in this Act: adjusted tax value, amount, annual rate, deduction, depreciable property, depreciation loss, depreciation method, diminishing value method, income year, own, straight-line method
Compare: 2004 No 35 s EE 17
EE 18 Cost: change from diminishing value to straight-line method
When this section applies
(1)
This section applies when a person changes from the diminishing value method to the straight-line method for an item of property for an income year.
How straight-line method applies
(2)
For the purposes of the formulas in sections EE 16 and EE 17, the item’s cost is treated as being the item’s adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the item for the income year.
Defined in this Act: adjusted tax value, amount, deduction, depreciation loss, diminishing value method, income year, property, straight-line method
Compare: 2004 No 35 s EE 18
EE 18B Cost: some depreciable intangible property
For the purposes of section EE 16 and this subpart, the cost to a person for an item of depreciable intangible property or a plant variety rights application (the amortising item) includes an amount of expenditure incurred by the person for an item of intangible property (the underlying item) if—
(a)
the underlying item gives rise to, supports, or is an item in which the person holds, the amortising item; and
(b)
the amount of expenditure is incurred by the person on or after 7 November 2013, if the amortising item is 1 of—
(i)
a patent or a patent application with a complete specification lodged on or after 1 April 2005:
(ii)
plant variety rights:
(iii)
a plant variety rights application:
(iv)
a design registration:
(v)
a design registration application:
(vi)
industrial artistic copyright; and
(c)
the person is denied a deduction for the expenditure under a provision outside this subpart.
Defined in this Act: deduction, depreciable intangible property, design registration, design registration application, industrial artistic copyright, plant variety rights
Section EE 18B: inserted (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on 24 February 2016, by section 117(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 18B: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 118(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 18B(b): replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 118(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 18B list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 118(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 18B list of defined terms design registration application: inserted (with effect on 1 April 2015), on 24 February 2016, by section 118(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 18B list of defined terms industrial artistic copyright: inserted (with effect on 1 April 2015), on 24 February 2016, by section 118(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EE 19 Cost: fixed life intangible property
When this section applies
(1)
This section applies when—
(a)
a person owns an item of fixed life intangible property; and
(b)
the person incurs additional costs in an income year for the item; and
(c)
the person is denied a deduction for the additional costs other than a deduction for an amount of depreciation loss.
When this section does not apply
(1B)
This section does not apply for additional costs incurred before 7 November 2013 for—
(a)
a design registration:
(b)
a design registration application:
(c)
industrial artistic copyright.
Additional costs for fixed life intangible property
(2)
For the purposes of the formula in section EE 16, the item’s cost at the start of the income year is treated as being the total of—
(a)
the item’s adjusted tax value at the start of the income year; and
(b)
the additional costs the person incurs.
Defined in this Act: adjusted tax value, amount, deduction, depreciation loss, design registration, design registration application, fixed life intangible property, income year, industrial artistic copyright, own
Compare: 2004 No 35 s EE 19
Section EE 19(1B) heading: inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 119(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 19(1B): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 119(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 19 list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 119(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 19 list of defined terms design registration application: inserted (with effect on 1 April 2015), on 24 February 2016, by section 119(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 19 list of defined terms industrial artistic copyright: inserted (with effect on 1 April 2015), on 24 February 2016, by section 119(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Amount of depreciation loss under pool method
EE 20 Application of sections EE 21 to EE 24
Sections EE 21 to EE 24 apply to the calculation of the amount of depreciation loss that a person using the pool method has.
Defined in this Act: amount, depreciation loss, pool method
Compare: 2004 No 35 s EE 20
EE 21 Pool method: calculating amount of depreciation loss
Amount of depreciation loss subtracted from pool’s value
(1)
The amount of depreciation loss that a person has for an income year for a pool of depreciable property is—
(a)
first, calculated under subsection (2); and
(b)
second, subtracted from the pool’s adjusted tax value at the end of the income year.
Amount
(2)
The amount of depreciation loss is calculated using the formula—
rate × ((starting adjusted tax value + ending adjusted tax value) ÷ 2)
× months ÷ 12.
Definition of items in formula
(3)
The items in the formula are defined in subsections (4) to (8).
Rate
(4)
Rate is the diminishing value rate. It is 1 of the following:
(a)
if the same rate applies to all items depreciated in the pool in the income year, that rate; or
(b)
if different rates apply to items depreciated in the pool in the income year,—
(i)
the lower of the rates, if there are 2 items in the pool; or
(ii)
the lowest of the rates, if there are 3 or more items in the pool.
Starting adjusted tax value
(5)
Starting adjusted tax value is—
(a)
the pool’s adjusted tax value at the start of the income year, increased as applicable by the amount referred to in section EE 22(2)(b); or
(b)
zero, if the pool did not exist at the start of the income year.
Ending adjusted tax value
(6)
Ending adjusted tax value is the pool’s adjusted tax value at the end of the income year before the deduction of an amount of depreciation loss for the pool for the income year. The value is, as applicable,—
(a)
increased by the amounts referred to in section EE 22(1) and (2)(a):
(b)
decreased by the amount referred to in section EE 22(3).
Months
(7)
Months, for a person, is the number of whole or part months in their income year, and the number may be more or less than 12.
Months: income year of longer than normal length[Repealed]
(8)
[Repealed]Defined in this Act: adjusted tax value, amount, deduction, depreciable property, depreciation loss, diminishing value rate, income year, own, pool
Compare: 2004 No 35 s EE 21
Section EE 21(5) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 117(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 21(5): substituted (with effect on 1 April 2008), on 6 October 2009, by section 117(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 21(6) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 117(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 21(6): substituted (with effect on 1 April 2008), on 6 October 2009, by section 117(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 21(7) heading: substituted (with effect on 1 April 2008), on 6 October 2009, by section 117(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 21(7): substituted (with effect on 1 April 2008), on 6 October 2009, by section 117(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 21(8) heading: repealed (with effect on 1 April 2008), on 6 October 2009, by section 117(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 21(8): repealed (with effect on 1 April 2008), on 6 October 2009, by section 117(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EE 22 Cases affecting pool
Acquired item included
(1)
If a person chooses in an income year to include in a pool an item of poolable property that they acquire in the income year, the pool’s adjusted tax value is increased by the item’s cost.
Separately depreciated item included
(2)
If a person chooses in an income year to include in a pool an item of poolable property that they depreciated separately in the previous income year,—
(a)
the pool’s adjusted tax value is increased by the item’s adjusted tax value on the date it is included in the pool; and
(b)
the item’s adjusted tax value at the end of the previous income year is included in starting adjusted tax value in section EE 21(5).
Insurance or compensation for damage to item
(2B)
If a person in an income year derives an amount of insurance, indemnity, or compensation (the compensation amount) for damage to an item included in a pool at the end of the income year and the compensation amount exceeds the expenditure or loss that the person incurs because of the damage, the excess is subtracted from the adjusted tax value of the pool.
Item disposed of
(3)
If a person disposes of an item included in a pool, and derives an amount of consideration from the disposal, or derives an amount of insurance, indemnity, or compensation to which subsection (2B) does not apply for damage to the item occurring before the disposal, any excess of the amount derived over the expenditure or loss incurred in deriving the amount is subtracted from the adjusted tax value of the pool in which the item was included on the date of the disposal.
All items disposed of
(4)
If, on the last day of an income year, the adjusted tax value of a person’s pool is positive but the person has disposed of all items that were in the pool,—
(a)
the amount of depreciation loss that the person has for the pool for the income year is the pool’s adjusted tax value; and
(b)
on the first day of the following income year, the pool’s adjusted tax value is zero.
Negative adjusted tax value
(5)
If, on the last day of an income year, the adjusted tax value of a person’s pool is negative,—
(a)
the amount by which the adjusted tax value is negative is an amount of depreciation recovery income of the person derived in the income year; and
(b)
on the first day of the following income year the pool’s adjusted tax value is zero.
Relationship with section EZ 10
(6)
Section EZ 10 (Pool items accounted for by globo method for 1992–93 income year) limits the amount of income arising under subsection (5)(a) in the circumstances described in the section.
Defined in this Act: acquire, adjusted tax value, amount, depreciation loss, depreciation recovery income, dispose, income, income year, pool, poolable property
Compare: 2004 No 35 s EE 22
Section EE 22(2B) heading: inserted (with effect on 4 September 2010), on 2 November 2012, by section 35(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section EE 22(2B): inserted (with effect on 4 September 2010), on 2 November 2012, by section 35(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section EE 22(3): amended (with effect on 4 September 2010), on 2 November 2012, by section 35(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
EE 23 Combined pools
Combining pools allowed
(1)
A person using the pool method may at any time combine any number of pools to form a single pool.
Consequences
(2)
When a person combines pools,—
(a)
the new pool’s adjusted tax value is the same as the sum of the adjusted tax values of the constituent pools; and
(b)
the adjusted tax value of each of the constituent pools at the end of the income year in which the pools are combined is zero; and
(c)
each of the constituent pools ceases to exist.
Defined in this Act: adjusted tax value, income year, pool, pool method
Compare: 2004 No 35 s EE 23
EE 24 Property ceasing to qualify for pool
If a person starts using an item of property included in a pool in such a way as to cause the item to cease to meet the requirements of section EE 66(4), they must account for it as if, on the day they first used it in that way,—
(a)
they disposed of it for its market value; and
(b)
they immediately reacquired it for its market value.
Defined in this Act: acquire, dispose, pool, property
Compare: 2004 No 35 s EE 24
EE 25 Depreciation loss for plant variety rights application granted in 2005–06 or later income year
When this section applies
(1)
This section applies when—
(a)
plant variety rights are granted to a person in their 2005–06 income year or a later income year; and
(b)
the rights are granted in relation to a plant variety rights application owned by the person; and
(c)
a deduction for expenditure is denied under another provision.
Calculation of deduction
(2)
For the income year in which the plant variety rights are granted, the person is allowed a deduction for expenditure on the plant variety rights application of an amount calculated using the formula—
cost × months of ownership ÷ depreciation months.
Definition of items in formula
(3)
In the formula,—
(a)
cost is the cost to the person of the plant variety rights application, including an amount incurred for the purpose of lodging an earlier application and giving rise under section CG 7B (Disposals or applications after earlier deductions) to a corresponding amount of income relating to the plant variety rights application:
(b)
months of ownership is the number of whole calendar months for which the person owns the plant variety rights application:
(c)
depreciation months is the total of the number of months of ownership under paragraph (b) and the number of months in the term for which the plant variety rights are granted in relation to the plant variety rights application.
Defined in this Act: amount, deduction, income year, plant variety rights
Compare: 2004 No 35 s EE 24B
Section EE 25(3)(a): replaced (with effect on 1 April 2014), on 30 June 2014 (applying for 2014–15 and later income years), by section 66(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EE 25 list of defined terms depreciation: repealed, on 24 February 2016, by section 243 of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Depreciation rates
EE 26 Setting of economic depreciation rate
Relevant provisions
(1)
The economic depreciation rate that applies to a kind of item of depreciable property is set under—
(a)
section EE 27, for items that—
(i)
are not buildings, fixed life intangible property, excluded depreciable property, or property for which an economic rate is set under section EE 29 or EE 30; and
(ii)
are acquired on or after 1 April 2005:
(b)
section EE 28, for items that are buildings and—
(i)
are acquired on or after 19 May 2005; and
(ii)
do not have an economic depreciation rate set under section EZ 23 (Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005):
(c)
section EE 29, for certain aircraft and motor vehicles acquired on or after 1 April 2005:
(d)
section EE 30, for items that—
(i)
have an estimated residual market value greater than 13.5% of cost:
(ii)
would, in the absence of section EE 30, have an economic depreciation rate set under section EE 27 or EE 28:
(e)
section EZ 23 for items that—
(i)
are not buildings, fixed life intangible property, or excluded depreciable property and are acquired before 1 April 2005:
(ii)
are buildings acquired before 19 May 2005:
(iii)
are buildings acquired on or after 19 May 2005, as relationship property or from a company in the same wholly-owned group of companies, from a person who applied to the item an economic depreciation rate set under section EZ 23 or a corresponding provision.
No rate for fixed life intangible property or excluded depreciable property
(2)
An economic depreciation rate must not be set for a kind of item of depreciable property that is fixed life intangible property or excluded depreciable property.
Overriding effect of election under section EE 32
(3)
Subsection (1)(a), (c), and (d) are overridden by section EE 32.
Defined in this Act: building, depreciable property, economic rate, estimated residual market value, excluded depreciable property, fixed life intangible property
Compare: 2004 No 35 s EE 25
Section EE 26 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
EE 27 Economic rate for certain depreciable property
What this section is about
(1)
This section is about setting the economic depreciation rate that applies to a kind of item of depreciable property.
Exclusion
(2)
This section does not apply to buildings, fixed life intangible property, excluded depreciable property, or property for which an economic rate is set under section EE 29 or EE 30.
Rate set by Commissioner
(3)
The Commissioner sets the rate from time to time by—
(a)
following the procedure set out in this section; and
(b)
issuing a determination under section 91AAF of the Tax Administration Act 1994.
Procedure for setting economic rate
(4)
To set the diminishing value rate for a kind of item of depreciable property, the Commissioner—
(a)
obtains a figure by applying the formula in subsection (5) to items of that kind; and
(b)
rounds the figure up or down to the nearest rate specified in schedule 11, column 1 (New banded rates of depreciation); and
(c)
sets the same rate for some or all of the kinds of items of depreciable property that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to—
(i)
the rate calculated for each kind; and
(ii)
the reduction in compliance costs that is likely to be achieved.
Formula
(5)
The formula is—
2 ÷ estimated useful life.
Definition of item in formula
(6)
In the formula, estimated useful life is the estimated useful life of the item expressed in years.
Defined in this Act: building, Commissioner, depreciable property, diminishing value rate, economic rate, estimated useful life, excluded depreciable property, fixed life intangible property
Compare: 2004 No 35 s EE 25B
Section EE 27 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
EE 28 Economic rate for buildings
What this section is about
(1)
This section is about setting the economic depreciation rate that applies to a kind of item of depreciable property that is a building and for which an economic rate is not set under section EE 30 or EZ 23 (Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005).
Rate set by Commissioner
(2)
The Commissioner sets the rate from time to time by—
(a)
following the procedure set out in this section; and
(b)
issuing a determination under section 91AAF of the Tax Administration Act 1994.
Procedure for setting economic rate
(3)
To set the straight-line rate for a kind of item of depreciable property, the Commissioner—
(a)
gets a figure by applying the formula in subsection (4) to items of that kind; and
(b)
rounds the figure up or down to the nearest rate specified in schedule 11, column 4 (New banded rates of depreciation); and
(c)
sets the same rate for some or all of the kinds of buildings that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to—
(i)
the rate calculated for each kind; and
(ii)
the reduction in compliance costs that is likely to be achieved.
Formula
(4)
The formula is—
1 ÷ estimated useful life.
Definition of item in formula
(5)
In the formula, estimated useful life is the estimated useful life of the item expressed in years.
Contracts existing at 19 May 2005
(6)
Despite subsection (1), a person who before 19 May 2005 enters into a binding contract for the acquisition or construction of a building must apply to the building the economic rate for the kind of the building determined under section EZ 23.
Defined in this Act: building, Commissioner, depreciable property, diminishing value rate, economic rate, estimated useful life, excluded depreciable property, fixed life intangible property
Compare: 2004 No 35 s EE 25C
Section EE 28(6): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 28 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
EE 29 Economic rate for certain aircraft and motor vehicles
What this section does
(1)
This section gives the economic depreciation rate for certain aircraft and motor vehicles.
Rate for certain aircraft
(2)
The economic rate for an aircraft is a diminishing value rate of 10% or a straight-line rate of 7% if the aircraft—
(a)
is self-propelled; and
(b)
has fixed wings; and
(c)
is not an international aircraft; and
(d)
is not used for top-dressing or spraying; and
(e)
is not a helicopter.
Rate for certain motor vehicles
(3)
The economic rate for a motor vehicle that is designed exclusively or mainly to carry persons and has seats for no more than 12 persons is a diminishing value rate of 30% or a straight-line rate of 21% if the motor vehicle—
(a)
is not available for hire:
(b)
is available for hire for a hire period of more than 1 month:
(c)
is a small passenger service vehicle:
(d)
is a minibus.
Defined in this Act: diminishing value rate, economic rate, international aircraft, minibus, small passenger service vehicle, straight-line rate
Compare: 2004 No 35 s EE 25D
Section EE 29(3)(c): amended, on 1 October 2017, by section 110(3) of the Land Transport Amendment Act 2017 (2017 No 34).
EE 30 Economic rate for plant, equipment, or building, with high residual value
What this section is about
(1)
This section is about setting the economic depreciation rate that applies to items of a kind of depreciable property if—
(a)
the kind of depreciable property is not fixed life intangible property, or excluded depreciable property, for which an economic rate cannot be set; and
(b)
the estimated residual market value for the item is more than 13.5% of cost; and
(c)
the items are—
(i)
plant or equipment acquired on or after 1 April 2005:
(ii)
buildings acquired on or after 19 May 2005.
Rate set by Commissioner
(2)
The Commissioner sets the rate from time to time by—
(a)
following the procedure set out in this section; and
(b)
issuing a determination under section 91AAF of the Tax Administration Act 1994.
Procedure for setting economic rate
(3)
To set the diminishing value rate for a kind of item of depreciable property, the Commissioner—
(a)
obtains a figure by applying the formula in subsection (4) to items of that kind; and
(b)
rounds the figure up or down to the nearest rate specified in schedule 11, column 1 (New banded rates of depreciation); and
(c)
sets the same rate for some or all of the kinds of items of depreciable property that are similar to one another, if the Commissioner thinks it is appropriate to do so having regard to—
(i)
the rate calculated for each kind; and
(ii)
the reduction in compliance costs that is likely to be achieved.
Formula
(4)
The formula is—
1 − ((residual value ÷ cost) (1 ÷ estimated useful life)).
Definition of items in formula
(5)
In the formula,—
(a)
residual value is the greater of—
(i)
estimated residual market value, which is defined in section EE 67:
(ii)
13.5% of cost:
(b)
cost is the cost of items of the kind to which the formula is applied:
(c)
estimated useful life is defined in section EE 63.
Defined in this Act: building, Commissioner, depreciable property, diminishing value rate, economic rate, estimated residual market value, estimated useful life, excluded depreciable property, fixed life intangible property
Compare: 2004 No 35 s EE 25E
Section EE 30(1)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 118 of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 30(3)(b): substituted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 30(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EE 30 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
EE 31 Annual rate for item acquired in person’s 1995–96 or later income year
What this section is about
(1)
This section is about the annual rate that applies to an item of depreciable property that a person acquires, other than under section FL 2(2) or FL 3(2) (which relate to the treatment of emigrating companies and their shareholders), in their 1995–96 income year or a later income year (not including fixed life intangible property or excluded depreciable property, for which rates are set in sections EE 33 and EZ 15 (Annual rate for excluded depreciable property: 1992–93 tax year)). Subsection (2) applies to specify the annual rate for the item if the requirements in subsection (2A) are met, and subsection (3) applies to specify the annual rate for the item if subsections (2A) and (2) do not apply and the requirements in subsection (3A) are met.
Requirements for subsection (2) rate
(2A)
This subsection applies, and the rate is 1 of the rates given by subsection (2), if the person—
(a)
acquires the item on or before 20 May 2010; or
(b)
decides to acquire or construct the item, meets the administrative requirements in subsection (4), and—
(i)
enters into a binding contract for the acquisition or construction of the item on or before 20 May 2010:
(ii)
after deciding to acquire or construct the item, incurs expenditure in relation to its acquisition or construction on or before 20 May 2010.
Rate for item acquired on or before 20 May 2010
(2)
If subsection (2A) applies, the rate is 1 of the following:
(a)
the item’s economic rate, special rate, or provisional rate, for an item not described in paragraph (b), (c), or (d):
(b)
the item’s economic rate, special rate, or provisional rate, multiplied by 1.2, for an item that—
(i)
has not been used or held for use in New Zealand as an item of depreciable property before the date on which the person acquires it; and
(ii)
is not a building; and
(iii)
is not a used imported car; and
(iv)
is not an international aircraft:
(c)
a diminishing value rate of 15% or a straight-line rate of 10%, for an international aircraft:
(d)
0% for a residential building that has an economic rate or provisional rate of more than 0% due to an estimated useful life of 50 years or more.
Requirements for subsection (3) rate
(3A)
This subsection applies, and the rate is 1 of the rates given by subsection (3), if subsections (2A) and (2) do not apply and the person—
(a)
acquires the item after 20 May 2010; or
(b)
decides to acquire or construct the item, and—
(i)
enters into a binding contract for the acquisition or construction of the item after 20 May 2010:
(ii)
incurs expenditure in relation to the item’s acquisition or construction after 20 May 2010.
Rate for item acquired after 20 May 2010
(3)
If subsection (3A) applies, the rate is 1 of the following:
(a)
the item’s economic rate, special rate, or provisional rate, for an item not described in paragraph (b) or (c):
(b)
a diminishing value rate of 15% or a straight-line rate of 10% for an international aircraft:
(c)
0%, for a residential building that has an economic rate or provisional rate of more than 0% due to an estimated useful life of 50 years or more.
Administrative requirements
(4)
For the purposes of subsection (2A)(b), a person must—
(a)
have available for the Commissioner documents dated on or before 20 May 2010 that evidence that the person had, on or before 20 May 2010, decided to acquire or construct the relevant item:
(b)
send to the Commissioner a statutory declaration that the person had, on or before 20 May 2010, decided to acquire or construct the relevant item.
Defined in this Act: acquire, annual rate, Commissioner, depreciable property, diminishing value rate, economic rate, estimated useful life, excluded depreciable property, fixed life intangible property, income year, international aircraft, New Zealand, residential building, straight-line rate
Compare: 2004 No 35 s EE 26
Section EE 31(1): amended (with effect on 30 August 2022), on 31 March 2023, by section 52 of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
Section EE 31(1): amended (with effect on 20 May 2010), on 21 December 2010, by section 49(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(1): amended (with effect on 20 May 2010), on 28 May 2010, by section 77(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(2A) heading: inserted (with effect on 20 May 2010), on 21 December 2010, by section 49(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(2A): inserted (with effect on 20 May 2010), on 21 December 2010, by section 49(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(2A)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 31(2A)(b)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 31(2A)(b)(ii): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 31(2) heading: substituted (with effect on 20 May 2010), on 28 May 2010, by section 77(2)(a) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(2): amended (with effect on 20 May 2010), on 21 December 2010, by section 49(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(2): amended (with effect on 20 May 2010), on 28 May 2010, by section 77(2)(b) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(2)(a): amended, on 1 April 2011 (applying for the 2011–12 and later income years), by section 77(4)(a) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(2)(a): substituted (with effect on 1 April 2008), on 6 October 2009, by section 119(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 31(2)(b): amended (with effect on 1 April 2008), on 6 October 2009, by section 119(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 31(2)(c): amended, on 1 April 2011 (applying for the 2011–12 and later income years), by section 77(4)(b) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(2)(d): added, on 1 April 2011 (applying for the 2011–12 and later income years), by section 77(4)(b) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(2)(d): amended, on 1 April 2020, by section 5(1) (and see section 5(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 31(3A) heading: inserted (with effect on 20 May 2010), on 21 December 2010, by section 49(4) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(3A): inserted (with effect on 20 May 2010), on 21 December 2010, by section 49(4) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(3A)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 31(3A)(b)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 31(3A)(b)(ii): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 31(3) heading: added (with effect on 20 May 2010), on 28 May 2010, by section 77(3) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(3): amended (with effect on 20 May 2010), on 21 December 2010, by section 49(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(3): added (with effect on 20 May 2010), on 28 May 2010, by section 77(3) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(3)(a): amended, on 1 April 2011 (applying for the 2011–12 and later income years), by section 77(4)(c) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(3)(b): amended, on 1 April 2011 (applying for the 2011–12 and later income years), by section 77(4)(d) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(3)(c): added, on 1 April 2011 (applying for the 2011–12 and later income years), by section 77(4)(d) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31(3)(c): amended, on 1 April 2020, by section 5(2) (and see section 5(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 31(4) heading: added (with effect on 20 May 2010), on 21 December 2010, by section 49(6) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(4): added (with effect on 20 May 2010), on 21 December 2010, by section 49(6) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31(4)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 31(4)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 31 list of defined terms building: repealed, on 1 April 2020, by section 5(3)(a) (and see section 5(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 31 list of defined terms Commissioner: inserted (with effect on 20 May 2010), on 21 December 2010, by section 49(7) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 31 list of defined terms estimated useful life: inserted, on 1 April 2011 (applying for the 2011–12 and later income years), by section 77(5) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 31 list of defined terms residential building: inserted, on 1 April 2020, by section 5(3)(b) (and see section 5(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
EE 32 Election in relation to certain depreciable property acquired on or after 1 April 2005
When this section applies
(1)
This section applies when a person acquired an item of depreciable property that is not a building—
(a)
on or after 1 April 2005; and
(b)
before the commencement of the person’s income year corresponding to the 2006–07 tax year.
Election to use economic depreciation rate determined under section EZ 23
(2)
The person may choose to calculate the depreciation loss for the item of depreciable property for income years corresponding to the 2005–06 tax year and later tax years in accordance with the economic rate determined for the kind of item under section EZ 23 (Economic rate for plant or equipment acquired before 1 April 2005 and buildings acquired before 19 May 2005).
Election to be made in return of income
(3)
The person must make an election under subsection (2) in the person’s return of income for the 2005–06 tax year.
Defined in this Act: building, depreciable property, depreciation loss, economic rate, income year, return of income, tax year
Compare: 2004 No 35 s EE 26B
Section EE 32(2): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 24 February 2016, by section 120(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 32 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 32 list of defined terms economic depreciation rate: repealed (with effect on 1 April 2008), on 24 February 2016, by section 120(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 32 list of defined terms economic rate: inserted (with effect on 1 April 2008), on 24 February 2016, by section 120(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EE 33 Annual rate for fixed life intangible property
What this section is about
(1)
This section is about the annual rate that applies to an item of fixed life intangible property, not including—
(a)
an item of excluded depreciable property for which a rate is set in section EZ 15 (Annual rate for excluded depreciable property: 1992–93 tax year):
(ab)
a design registration for which a rate is set in section EE 34B:
(b)
a patent for which a rate is set in section EE 34.
Rate
(2)
The rate is the rate calculated using the formula—
1 ÷ legal life.
Definition of item in formula
(3)
In the formula, legal life is,—
(a)
if section EE 18B or EE 19 apply, the item’s remaining legal life from the start of the income year in which the relevant costs are recognised under the section:
(b)
if sections EE 18B and EE 19 do not apply, the item’s remaining legal life from the time at which a person acquires it.
How rate expressed
(4)
The rate given by the formula is expressed as a decimal and rounded to 2 decimal places, with numbers at the midpoint or greater being rounded up and other numbers being rounded down.
Defined in this Act: acquire, annual rate, design registration, excluded depreciable property, fixed life intangible property, income year, legal life
Compare: 2004 No 35 s EE 27
Section EE 33(1)(ab): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 121(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 33(3)(a): replaced (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on 24 February 2016, by section 121(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 33(3)(b): amended (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on 24 February 2016, by section 121(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 33 list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 121(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EE 34 Annual rate for patent granted in 2005–06 or later income year
When this section applies
(1)
This section applies to an item that is a patent when the patent is acquired by a person in their 2005–06 income year or a later income year.
Rate
(2)
The rate is the rate calculated using the formula—
1 ÷ legal life.
Definition of item in formula
(3)
In the formula, legal life is set out in whichever of subsections (4) to (7) applies to the patent.
Fixed life intangible property
(4)
If the patent is an item of fixed life intangible property to which section EE 18B or EE 19 applies, legal life is the patent’s remaining legal life from the start of the income year in which the relevant costs are recognised under the section.
No depreciation loss for patent application
(5)
If sections EE 18B and EE 19 do not apply to the patent and the person has been denied a deduction for an amount of depreciation loss for the patent application, legal life is the patent’s remaining legal life from the time at which the person acquires the patent.
Depreciation loss for patent application
(6)
If sections EE 18B and EE 19 do not apply to the patent, and have not applied to the patent application while the person has owned it, and the person has been allowed a deduction for an amount of depreciation loss for the patent application, legal life is the remaining legal life of the patent application from the start of the income year in which the person acquires the patent application.
When section EE 18B or EE 19 applied to patent application
(7)
If sections EE 18B and EE 19 do not apply to the patent, but have applied to the patent application while the person has owned it, and the person has been allowed a deduction for an amount of depreciation loss for the patent application, legal life is the remaining legal life of the patent application from the start of the income year in which the person acquires the patent.
How rate expressed
(8)
The rate calculated using the formula is expressed as a decimal and rounded to 2 decimal places, with numbers at the midpoint or greater being rounded up and other numbers being rounded down.
Defined in this Act: acquire, amount, deduction, depreciation loss, income year, legal life
Compare: 2004 No 35 s EE 27B
Section EE 34(4): replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 122(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 34(5): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 122(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 34(6): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 122(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 34(7) heading: amended (with effect on 1 April 2015), on 24 February 2016, by section 122(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 34(7): amended, on 29 March 2018 (with effect on 1 April 2015), by section 67 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section EE 34(7): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 122(5) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EE 34B Annual rate for design registrations
When this section applies
(1)
This section applies to an item that is a design registration (the design).
Rate
(2)
The rate is the rate calculated using the formula—
1 ÷ legal life.
Definition of item in formula
(3)
In the formula, legal life is set out in whichever of subsections (4) to (7) applies to the design.
When section EE 18B or EE 19 applies to design
(4)
If the design is an item to which section EE 18B or EE 19 applies, legal life is the design’s remaining legal life from the start of the income year in which the relevant costs are recognised under the section.
When no depreciation loss for design application
(5)
If sections EE 18B and EE 19 do not apply to the design and the person has been denied a deduction for an amount of depreciation loss for the design’s design registration application (the design application), legal life is the design’s remaining legal life from the first time a cost is recognised for the design under this subpart.
When depreciation loss for design application
(6)
If sections EE 18B and EE 19 do not apply to the design, and have not applied to the design application while the person has owned it, and the person has been allowed a deduction for an amount of depreciation loss for the design application, legal life is the remaining legal life of the design application from the first time a cost is recognised for the application under this subpart.
When section EE 18B or EE 19 applied to design application
(7)
If sections EE 18B and EE 19 do not apply to the design, but have applied to the design application while the person has owned it, and the person has been allowed a deduction for an amount of depreciation loss for the design application, legal life is the remaining legal life of the design application from the first time a cost is recognised for the design under this subpart.
How rate expressed
(8)
The rate calculated using the formula is expressed as a decimal and rounded to 2 decimal places, with numbers at the midpoint or greater being rounded up and other numbers being rounded down.
Defined in this Act: deduction, depreciation loss, design registration, design registration application, income, legal life, own
Section EE 34B: inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 123(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EE 35 Special rate or provisional rate
Rate set for item of depreciable property
(1)
A special rate or a provisional rate is set for an item of depreciable property under sections 91AAG to 91AAJ of the Tax Administration Act 1994.
No special rate for excluded depreciable property or residential building
(2)
A special rate may not be set for an item of excluded depreciable property or a residential building.
No provisional rate for fixed life intangible property or excluded depreciable property
(3)
A provisional rate may not be set for an item of fixed life intangible property or an item of excluded depreciable property.
Exception
(4)
Section FA 11B(7) (Adjustments for certain operating leases) overrides this section.
Defined in this Act: depreciable property, excluded depreciable property, fixed life intangible property, provisional rate, residential building, special rate
Compare: 2004 No 35 s EE 28
Section EE 35(2) heading: substituted (with effect on 20 May 2010), on 28 May 2010, by section 78(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 35(2) heading: amended, on 1 April 2020, by section 6(1) (and see section 6(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 35(2): substituted (with effect on 20 May 2010), on 28 May 2010, by section 78(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 35(2): amended, on 1 April 2020, by section 6(2) (and see section 6(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 35(4) heading: inserted, on 1 April 2008, by section 356 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EE 35(4): inserted, on 1 April 2008, by section 356 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EE 35 list of defined terms building: repealed, on 1 April 2020, by section 6(3)(a) (and see section 6(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 35 list of defined terms residential building: inserted, on 1 April 2020, by section 6(3)(b) (and see section 6(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 35 list of defined terms special excluded depreciable property: repealed, on 1 April 2020, by section 6(3)(a) (and see section 6(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
EE 36 Using economic rate or provisional rate instead of special rate
Allowed to use economic or provisional rate
(1)
A person may depreciate an item to which a special rate applies by applying, instead, the economic rate applicable to the item or a provisional rate applicable to the item. This subsection is overridden by subsection (2).
Not allowed to use economic or provisional rate
(2)
The person must not depreciate the item by applying the economic rate or the provisional rate, if—
(a)
a special rate applies to the item; and
(b)
the special rate is higher than the economic rate; and
(c)
the person applies the special rate to the item for an income year; and
(d)
in a later income year, the item’s market value declines at a rate equal to or greater than the special rate; and
(e)
it is a reasonable conclusion from all the circumstances of the case that the person’s purpose, or 1 of the person’s purposes, in wanting to change from the special rate to the economic rate or the provisional rate for the later income year is to enable the person to defer the deduction that the person is allowed for the amount of depreciation loss for the item’s decline in value.
Defined in this Act: amount, deduction, depreciation loss, economic rate, income year, provisional rate, special rate
Compare: 2004 No 35 s EE 29
Improvements, items of low value, or items no longer used
EE 37 Improvements
When this section applies
(1)
This section applies when a person makes an improvement to an item of depreciable property.
Income year in which improvement made
(2)
In the income year in which the person makes the improvement, the provisions of this subpart apply to the improvement, as if it were a separate item of depreciable property, in the period that—
(a)
starts at the start of the month in which the person first uses the improvement or has it available for use; and
(b)
ends at the end of the income year.
Following income years
(3)
For income years following the income year in which the person makes the improvement,—
(a)
a person who uses the diminishing value method or the straight-line method for the item that was improved may choose to apply subsection (4) or (5):
(ab)
[Repealed](b)
a person who uses the pool method for the item that was improved must apply subsections (6) and (7).
Improvement compulsorily treated as separate item[Repealed]
(3B)
[Repealed]Improvement treated as separate item
(4)
For the purposes of subsection (3)(a), a person may choose to treat the improvement as a separate item of depreciable property.
Improvement treated as part of item
(5)
For the purposes of subsection (3)(a), a person may choose to treat the improvement as part of the item of depreciable property that was improved. They must do 1 of the following for the first income year, after the income year in which they made the improvement, in which they use the improvement or have it available for use:
(a)
if they use the diminishing value method for the item, add the improvement’s adjusted tax value at the start of the income year to the item’s adjusted tax value at the start of the income year:
(b)
if they use the straight-line method for the item,—
(i)
add the improvement’s adjusted tax value at the start of the income year to the item’s adjusted tax value at the start of the income year; and
(ii)
add the improvement’s cost to the item’s cost.
Pool method
(6)
For the purposes of subsection (3)(b), a person who uses the pool method for the item that was improved must treat the improvement as a separate item of depreciable property. If its cost is equal to or less than its maximum pooling value, they must include it in a pool in the first income year, after the income year in which they made the improvement, in which they use the improvement or have it available for use.
Adjustment of pool’s value
(7)
When an improvement is included in a pool under subsection (6),—
(a)
the pool’s adjusted tax value is increased by the improvement’s adjusted tax value on the date it is included in the pool; and
(b)
the improvement’s adjusted tax value at the end of the previous income year is included in starting adjusted tax value in section EE 21(5).
Defined in this Act: adjusted tax value, building, depreciable property, diminishing value method, improvement, income year, maximum pooling value, pool, pool method, straight-line method
Compare: 2004 No 35 s EE 30
Section EE 37(3)(a): replaced, on 1 April 2020, by section 7(1) (and see section 7(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 37(3)(ab): repealed, on 1 April 2020, by section 7(1) (and see section 7(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 37(3B) heading: repealed, on 1 April 2020, pursuant to section 7(2) (and see section 7(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 37(3B): repealed, on 1 April 2020, by section 7(2) (and see section 7(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 37 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 37 list of defined terms grandparented structure: repealed, on 1 April 2020, by section 7(3) (and see section 7(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 37 list of defined terms international aircraft: repealed, on 1 April 2020, by section 7(3) (and see section 7(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 37 list of defined terms New Zealand: repealed, on 1 April 2020, by section 7(3) (and see section 7(4) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
EE 38 Items of low value
When this section applies
(1)
This section applies for an item of property that a person acquires, in an income year, when—
(a)
the total cost for the item is equal to or less than the threshold value given for the item by subsection (2); and
(b)
the person uses the item, or has the item available for use, in the income year; and
(c)
the item would be depreciable property if the person did not deal with it under this section; and
(d)
the item has not been and will not become part of any other property that is depreciable property; and
(e)
the person is denied a deduction for the cost of the item if the person does not deal with the item under this section; and
(f)
the item is one of a group of items, acquired at the same time and from the same supplier, to which the same depreciation rate would apply if they were all treated as items of depreciable property,—
(i)
if subparagraph (ii) does not apply, the total cost for all the items in the group is equal to or less than the threshold value given for the item by subsection (2):
(ii)
if the items generally constitute the person’s trading stock, the total cost for all the items in the group not treated by the person solely as trading stock is equal to or less than the threshold value given for the item by subsection (2).
Threshold value for item
(2)
The threshold value for an item is—
(a)
$200, if the item is acquired before 19 May 2005:
(b)
$500, if the item is acquired on or after 19 May 2005 and before 17 March 2020:
(c)
$5,000, if the item is acquired on or after 17 March 2020 and before 17 March 2021:
(d)
$1,000, if the item is acquired on or after 17 March 2021.
Amount of depreciation loss
(3)
If the person chooses to deal with the item under this section, the amount of depreciation loss that the person has for the item for the income year is the item’s cost.
How election made
(4)
The person makes the election by claiming, in their return of income for the income year for which the election is made, a deduction for the amount of depreciation loss described in subsection (3).
Amount of depreciation recovery income
(5)
If the person disposes in an income year of an item for which they have been allowed a deduction on a claim under subsection (3), the consideration they derive from the disposal is an amount of depreciation recovery income for the income year.
Change of use treated as disposal
(6)
Subsection (7) applies when—
(a)
a person has been allowed a deduction on a claim under subsection (3) for an item; and
(b)
at a later time, the person stops using the item, or having the item available for use, mainly in deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
(c)
the use to which the item is put at the later time is not subject to fringe benefit tax.
Disposal
(7)
The person is treated as having disposed of the item for its market value at the later time.
Increase in specified sum
(8)
The Governor-General may make an Order in Council increasing the sum specified in subsection (1)(a) and (f).
Secondary legislation
(9)
An Order in Council under subsection (8) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: acquire, amount, assessable income, business, deduction, depreciable property, depreciation loss, depreciation recovery income, dispose, fringe benefit tax, income year, property, return of income, trading stock
Compare: 2004 No 35 s EE 31
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | PCO must publish it on the legislation website and notify it in the Gazette | LA19 s 69(1)(c) | ||
| Presentation | The Minister must present it to the House of Representatives | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
Section EE 38(2)(b): amended (with effect on 17 March 2020), on 25 March 2020, by section 8(1) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 38(2)(c): inserted (with effect on 17 March 2020), on 25 March 2020, by section 8(2) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 38(2)(d): inserted (with effect on 17 March 2020), on 25 March 2020, by section 8(2) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 38(9) heading: inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Section EE 38(9): inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
EE 39 Items no longer used
When this section applies
(1)
This section applies when a person in an income year has an item of depreciable property that—
(a)
is no longer used or, because the geothermal energy proving period has ended, becomes unavailable for use under section EE 6(4); and
(b)
is not a building, unless the item meets the requirements of subsection (2); and
(c)
has not been depreciated using the pool method.
Buildings
(2)
This section applies to a building that meets the requirements of subsection (1)(a) and (c) if—
(a)
the building has been irreparably damaged and rendered useless for the purpose of deriving income; and
(b)
the damage occurs—
(i)
in the 2005–06 income year or a later income year:
(ii)
as a result of the extreme climatic conditions that occurred during the month of February 2004 in New Zealand:
(iii)
as a result of the storm event that occurred during the month of July 2004 in the Bay of Plenty area; and
(c)
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.
Amount of depreciation loss under this section
(3)
The person has an amount of depreciation loss under this section and under no other provision of this subpart.
Circumstances
(4)
The person has an amount of depreciation loss if—
(a)
they no longer use the item in deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
(b)
neither they nor a person associated with them intends to use the item in deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
(c)
the costs of disposing of the item would be more than any consideration they could derive from disposing of it.
Amount
(5)
The amount of depreciation loss is the item’s adjusted tax value at the start of the income year.
Adjusted tax value at end of year
(6)
The item’s adjusted tax value at the end of the income year is zero.
Defined in this Act: adjusted tax value, amount, assessable income, associated person, building, business, depreciable property, depreciation loss, dispose, geothermal energy proving period, income year, pool method
Compare: 2004 No 35 s EE 32
Section EE 39 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Transfers of depreciable property: associated persons and certain amalgamations
EE 40 Transfer of depreciable property on or after 24 September 1997
When this section applies
(1)
This section applies when, on or after 24 September 1997, a person (person A) acquires, directly or indirectly, an item of property from an associated person to whom any of subsections (2) to (6) applies. The income year referred to is the income year of the associated person.
Deduction for depreciation loss allowed in year of acquisition
(2)
The associated person is allowed a deduction for an amount of depreciation loss for the item for the income year in which person A acquires it, or would have been allowed the deduction if section EE 11(1) had not applied, or if the rate for the item was not 0% in the case of a building with a rate of 0%.
Deduction for depreciation loss allowed in year before acquisition
(3)
The associated person was allowed a deduction for an amount of depreciation loss for the income year before that in which person A acquired it, or would have been allowed a deduction if the rate for the item was not 0% in the case of a building with a rate of 0%.
When section DZ 9 applies
(4)
The associated person has been allowed a deduction for the item under section DZ 9 (Premium paid on land leased before 1 April 1993)—
(a)
for the income year in which person A acquired it; or
(b)
for the income year before that in which person A acquired it; or
(c)
would have been allowed a deduction in either income year if they had incurred a cost for the item for which they were denied any other deduction.
If costs incurred for which deduction denied
(5)
The associated person would have been allowed a deduction for an amount of depreciation loss for the item—
(a)
for the income year in which person A acquired it, if they had incurred a cost for the item for which they were denied any other deduction and if section EE 11(1) had not applied; or
(b)
for the income year before that in which person A acquired it, if they had incurred a cost for the item for which they were denied any other deduction.
When section EE 8 applies
(6)
The associated person would have been a person to whom any of subsections (2) to (5) applied, if they had not made an election under section EE 8.
Cost of item to person A
(7)
For the purposes of determining the amount of depreciation loss that person A has, the cost of the item to person A is treated as 1 of the following:
(a)
if section EE 58 applies to set a base value for the item, the lesser of—
(i)
the cost of the item to person A:
(ii)
the item’s market value when the associated person starts to use it, or to have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
(b)
if section EE 58 does not apply, the lesser of—
(i)
the cost of the item to person A:
(ii)
the cost of the item to the associated person.
Exclusions
(8)
Subsection (7) does not apply if—
(a)
the item is not depreciable intangible property, and the Commissioner decides that it is appropriate to use the cost of the item to person A for the purposes of determining the amount of depreciation loss that person A has for the item:
(b)
the cost to person A is income of the associated person, other than under section EE 48(1):
(c)
person A acquires the item on a settlement of relationship property to which section FB 21 (Depreciable property) applies.
Rate
(9)
The annual rate that person A applies to the item must be 1 of the following:
(a)
when person A uses the same depreciation method for the item as that used by the associated person for it, the annual rate must be no more than the annual rate that the associated person applied to it:
(b)
when person A uses a depreciation method for the item that is different from the method the associated person used for it, the annual rate must be no more than a rate equivalent to the rate that the associated person applied to it, as determined by schedule 10 (Straight-line equivalents of diminishing value rates of depreciation).
Statutory change: exception
(9B)
Subsection (9) does not apply when person A may, due to a change of annual rate by a statute, apply an annual rate that is more than the annual rate that the associated person applied.
Fixed life intangible property
(10)
Subsection (9) does not apply to an item of fixed life intangible property whose rate is set in section EE 33.
Relationship with section EE 41 and subpart FC
(11)
This section—
(a)
is overridden by section EE 41:
(b)
does not apply to a bequest of property when subpart FC (Distribution, transmission, and gifts of property) applies to it and the property is disposed of at market value.
Defined in this Act: acquire, amount, annual rate, assessable income, associated person, business, Commissioner, deduction, depreciable intangible property, depreciation loss, depreciation method, fixed life intangible property, income, income year, property, settlement of relationship property
Compare: 2004 No 35 s EE 33
Section EE 40(2): amended (with effect on 1 April 2011), on 30 March 2022, by section 79(1) (and see section 79(3) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 40(3): amended (with effect on 1 April 2011), on 30 March 2022, by section 79(2) (and see section 79(3) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 40(9B) heading: inserted (with effect on 1 April 2020), on 30 March 2021, by section 35(1) (and see section 35(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EE 40(9B): inserted (with effect on 1 April 2020), on 30 March 2021, by section 35(1) (and see section 35(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EE 40(10): amended (with effect on 1 April 2008), on 30 March 2021, by section 35(2) (and see section 35(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
EE 41 Transfer of depreciable property on certain amalgamations on or after 14 May 2002
When this section applies
(1)
This section applies when, on or after 14 May 2002, an amalgamated company acquires, directly or indirectly, an item of property from an amalgamating company, and—
(a)
the amalgamated company’s acquisition of the item is part of an amalgamation that is not a resident’s restricted amalgamation; and
(b)
the amalgamating company is an associated person of the amalgamated company, treating the amalgamating company as existing at the time that the amalgamated company is treated under section FO 11(1)(b) or FO 15(3) (which relate to property passing on certain amalgamations) as having acquired the property from the amalgamating company.
Cost of item to person
(2)
For the purposes of determining the amount of depreciation loss that the amalgamated company has, the cost of the item to it is treated as 1 of the following:
(a)
if section EE 58 applies for the amalgamating company and the item, the lesser of—
(i)
the value given under section FO 11 or FO 15, as applicable; and
(ii)
the item’s market value when the amalgamating company starts to use it, or to have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
(b)
if section EE 58 does not apply for the amalgamating company and the item, the lesser of—
(i)
the value given under section FO 11 or FO 16 (Amortising property), as applicable; and
(ii)
the cost of the item to the amalgamating company.
Exclusions
(3)
Subsection (2) does not apply if—
(a)
the item is not depreciable intangible property, and the Commissioner decides that it is appropriate to use the cost of the item to the amalgamated company for the purposes of determining the amount of depreciation loss that it has for the item:
(b)
the cost to the amalgamated company is income of the amalgamating company, other than under section EE 48(1).
Rate
(4)
The annual rate that the amalgamated company applies to the item must be 1 of the following:
(a)
when the amalgamated company uses the same depreciation method for the item as that used by the amalgamating company for it, the annual rate that the amalgamated company applies to it must be no more than the annual rate that the amalgamating company applied to it:
(b)
when the amalgamated company uses a depreciation method for the item that is different from the method the amalgamating company used for it, the annual rate that the amalgamated company applies to it must be no more than a rate equivalent to the rate that the amalgamating company applied to it, as determined by schedule 10 (Straight-line equivalents of diminishing value rates of depreciation).
Fixed life intangible property
(5)
Subsection (4) does not apply to an item of fixed life intangible property whose rate is set in section EE 33.
Defined in this Act: acquire, amalgamated company, amalgamating company, amalgamation, amount, annual rate, assessable income, business, Commissioner, depreciable intangible property, depreciation loss, depreciation method, fixed life intangible property, income, income year, property, resident’s restricted amalgamation
Compare: 2004 No 35 s EE 34
Section EE 41(2)(b)(i): amended, on 30 March 2017, by section 60 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
EE 42 Transfer of radiocommunications licence right on or after 24 September 1997
When this section applies
(1)
This section applies when, on or after 24 September 1997, the holder of management rights created under the Radiocommunications Act 1989 grants a licence right under that Act to an associated person.
Exclusion
(2)
This section does not apply when the Crown acting by and through the Secretary of Commerce is named as the manager under section 11(1) of the Radiocommunications Act 1989.
Cost of licence right
(3)
For the purposes of determining the amount of depreciation loss that the associated person has, the cost of the licence right to the associated person is treated as zero.
Defined in this Act: amount, associated person, depreciation loss
Compare: 2004 No 35 s EE 35
EE 43 Transfer of depreciable intangible property on or after 1 July 1997
When this section applies
(1)
This section applies when, on or after 1 July 1997, a person (person A) acquires, directly or indirectly, from an associated person an item of depreciable intangible property that—
(a)
was not depreciable property of the associated person because it was not of a kind listed in schedule 14 (Depreciable intangible property) at the time the associated person acquired it; and
(b)
was not an item for whose cost the associated person was allowed a deduction, other than a deduction for an amount of depreciation loss, under a provision of this Act outside this subpart.
No amount of depreciation loss
(2)
Person A does not have an amount of depreciation loss for the item.
Defined in this Act: acquire, amount, associated person, deduction, depreciable intangible property, depreciable property, depreciation loss
Compare: 2004 No 35 s EE 36
Disposals and similar events
EE 44 Application of sections EE 48 to EE 51
When sections apply
(1)
Sections EE 48 to EE 51 apply when a person has consideration from the disposal of an item or from an event involving an item, if—
(a)
the consideration is consideration of a kind described in section EE 45; and
(b)
either—
(i)
the item is an item of a kind described in section EE 46; or
(ii)
the event is an event of a kind described in section EE 47.
Exclusions
(2)
Sections EE 48 to EE 51 do not apply when—
(a)
a person disposes of an item of intangible property as part of an arrangement to replace it with an item of the same kind:
(b)
a person’s patent application has concluded because a patent is granted to the person in relation to the application:
(bb)
a person’s design registration application has concluded because a design registration is granted to the person in relation to the application:
(c)
a person’s geothermal well becomes unavailable for use under section EE 6(4) because the geothermal energy proving period has ended:
(d)
a person receives, for an item of property, an amount of insurance or compensation to which section EZ 23B (Property acquired after depreciable property affected by Canterbury earthquakes) applies.
Defined in this Act: arrangement, consideration, design registration, design registration application, dispose, geothermal energy proving period, geothermal well, property
Compare: 2004 No 35 s EE 37
Section EE 44 heading: amended, on 30 March 2017, by section 61(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 44(1): amended, on 30 March 2017, by section 61(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 44(1): amended (with effect on 1 April 2008), on 21 December 2010, by section 51 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 44(2): amended, on 29 March 2018 (with effect on 30 March 2017), by section 68 of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section EE 44(2)(bb): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 124(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 44(2)(c): amended (with effect on 4 September 2010), on 29 August 2011, by section 24 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 44(2)(d): added (with effect on 4 September 2010), on 29 August 2011, by section 24 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 44(2)(d): amended (with effect on 4 September 2010), on 30 March 2022, by section 80 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 44 list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 124(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 44 list of defined terms design registration application: inserted (with effect on 1 April 2015), on 24 February 2016, by section 124(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EE 45 Consideration for purposes of section EE 44
General rule
(1)
For the purposes of section EE 44, the consideration equals the amount that a person derives excluding any GST charged if the person is a registered person, as modified by subsections (3) to (11) minus the amount (the disposal cost) that they incur in deriving that amount, to the extent to which the disposal cost—
(a)
is not allowed as a deduction to the person other than as a deduction for an amount of depreciation loss; and
(b)
is not counted in “the amount that a person derives”
.
GST for disposal costs
(1B)
All amounts deducted or deductible by the person under section 20(3) of the Goods and Services Tax Act 1985 in relation to the disposal cost described in subsection (1) are subtracted from the disposal costs under that subsection.
Consideration may be zero or negative
(2)
For the purposes of section EE 44, the consideration may be zero or a negative amount.
Other than market value
(3)
If the person has consideration that is not the item’s market value, the amount that the person derives is the item’s market value. Three qualifications are—
(a)
if the person makes a taxable supply, “market value”
means the market value minus any GST that would be charged on the supply:
(b)
this subsection does not apply to a transfer under a relationship agreement; and
(c)
this subsection does not apply in a case described in any of subsections (5) to (10).
Relationship with subpart FC
(4)
Subsection (3) does not apply to a disposal of property to which any of sections FC 3 and FC 4 (which relate to the distribution or transmission of property) applies.
Change of use or location of use
(5)
The consideration that a person derives from the event described in section EE 47(2) is the item’s market value. Two qualifications are—
(a)
if the person is a registered person, “market value” means the market value excluding the amount of GST that would have been charged if the market value is treated as being consideration received for a taxable supply by the person:
(b)
this subsection does not apply to a transfer under a relationship agreement.
Loss or theft
(6)
The amount that a person derives from the event described in section EE 47(3) is the amount of insurance, indemnity, or compensation they receive for the loss or theft (amount A). If the person is a registered person, amount A does not include the amount, if any, of GST charged on amount A to the extent to which amount A is treated as being consideration received for a supply of services by the registered person under section 5(13) of the Goods and Services Tax Act 1985.
Unused geothermal well brought into use
(7)
The amount that a person derives from the event described in section EE 47(6) is the amount of the deduction for depreciation loss allowed under section EE 39(4).
Irreparable damage or damage rendering building useless
(8)
The amount that a person derives from the event described in section EE 47(4) is the total of the amount of insurance, indemnity, or compensation, and the amount of proceeds from the disposal, they receive for the affected item (amount A). If the person is a registered person, amount A does not include the amount, if any, of GST charged on amount A to the extent to which amount A is treated as being consideration received for a supply of services by the registered person under section 5(13) of the Goods and Services Tax Act 1985.
Repossession
(9)
The amount that a person derives from the event described in section EE 47(5) is the item’s cost minus the net amount paid. Two qualifications are—
(a)
if the person is a registered person, the “amount that a person derives”
does not include any GST charged on a taxable supply they make:
(b)
“net amount paid”
means the amount paid by the buyer to the seller for the item under the contract minus any amount refunded by the seller to the buyer.
Other items
(10)
The amount that a person derives from the disposal of an item along with any other item, or from the occurrence of an event involving an item that also involves other items, is the item’s market value. Two qualifications are—
(a)
if the person makes a taxable supply, “market value”
means the market value minus any GST that would be charged on the supply:
(b)
this subsection does not apply to a transfer under a relationship agreement.
Item leaving New Zealand permanently
(11)
The amount that a person derives from the event referred to in section EE 47(10) is described in section EZ 21(1) (Sections EE 45 and EE 47: permanent removal: allowance before 1 April 1995).
Item fitted to aircraft or aircraft engine in aircraft engine overhaul
(12)
The amount that the person derives from the event referred to in section EE 47(11) is the adjusted tax value of the item before it is fitted as a replacement piece to an aircraft or aircraft engine as part of the aircraft engine overhaul.
Defined in this Act: adjusted tax value, aircraft engine, aircraft engine overhaul, amount, consideration, deduction, depreciation loss, dispose, geothermal well, GST, GST charged, New Zealand, registered person, relationship agreement, services, taxable supply
Compare: 2004 No 35 s EE 38
Section EE 45(1) heading: substituted (with effect on 1 April 2008), on 21 December 2010, by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(1): substituted (with effect on 1 April 2008), on 21 December 2010, by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(1B) heading: inserted (with effect on 1 April 2008), on 21 December 2010, by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(1B): inserted (with effect on 1 April 2008), on 21 December 2010, by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(2) heading: substituted (with effect on 1 April 2008), on 21 December 2010, by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(2): substituted (with effect on 1 April 2008), on 21 December 2010, by section 52(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(3): amended (with effect on 1 April 2008), on 21 December 2010, by section 52(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(5)(a): replaced, on 18 March 2019, by section 164 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EE 45(6): amended (with effect on 1 April 2008), on 21 December 2010, by section 52(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(7): amended (with effect on 1 April 2008), on 21 December 2010, by section 52(4) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(8) heading: substituted (with effect on 4 September 2010), on 29 August 2011, by section 25(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 45(8): amended (with effect on 4 September 2010), on 2 November 2012, by section 36(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section EE 45(8): amended (with effect on 4 September 2010), on 29 August 2011, by section 25(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 45(8): amended (with effect on 1 April 2008), on 21 December 2010, by section 52(5) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(9): amended (with effect on 1 April 2008), on 21 December 2010, by section 52(6)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(9)(a): amended (with effect on 1 April 2008), on 21 December 2010, by section 52(6)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(10): amended (with effect on 1 April 2008), on 21 December 2010, by section 52(7) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(11): amended (with effect on 1 April 2008), on 21 December 2010, by section 52(8) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 45(12) heading: inserted, on 1 April 2017, by section 62(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 45(12): inserted, on 1 April 2017, by section 62(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 45 list of defined terms adjusted tax value: inserted, on 1 April 2017, by section 62(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 45 list of defined terms aircraft engine: inserted, on 1 April 2017, by section 62(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 45 list of defined terms aircraft engine overhaul: inserted, on 1 April 2017, by section 62(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
EE 46 Items for purposes of section EE 44
Items to which sections EE 48 to EE 52 apply
(1)
For the purposes of section EE 44, an item of property to which sections EE 48 to EE 52 apply is an item of depreciable property that a person owns, including—
(a)
an item for which the person has been allowed a deduction for an amount of depreciation loss they have had under section EE 33; and
(b)
an item to which section CZ 11 (Recovery of deductions for software acquired before 1 April 1993) applies.
Exclusions
(2)
Sections EE 48 to EE 52 do not apply to—
(a)
an item of property that, on the date on which the disposal or the event occurs, is accounted for in a pool; or
(b)
an item of petroleum-related depreciable property; or
(c)
an item of intangible property that is excluded depreciable property, other than software; or
(d)
a land improvement that is excluded depreciable property of a kind for which no deduction for depreciation was allowed under section 108 of the Income Tax Act 1976.
Defined in this Act: amount, deduction, depreciable property, depreciation loss, excluded depreciable property, own, petroleum-related depreciable property, pool, property
Compare: 2004 No 35 s EE 39
EE 47 Events for purposes of section EE 44
Events to which sections EE 48 to EE 51 apply
(1)
For the purposes of section EE 44, this section describes the events to which sections EE 48 to EE 51 apply.
Change of use or location of use
(2)
The first event is the change of use, or change of location of use, of an item of property, as a result of which a person is denied a deduction for an amount of depreciation loss for the item for the next income year. The event is treated as occurring on the first day of the next income year, and includes a change in use of an item for the purposes of the definition of commercial fit-out and a change in the status of a building related to an item for the purposes of that definition.
Event timing for person’s income becoming tax exempt
(2B)
Despite subsection (2), if the event is connected to a person’s income becoming exempt income, the event is treated as occurring immediately before the person’s income becomes exempt.
Loss or theft
(3)
The second event is the loss or theft of an item of property, if the item is not recovered in the income year in which the loss or theft occurs.
Irreparable damage or damage rendering building useless
(4)
The third event is—
(a)
the irreparable damage of an item of property that is not a building; or
(b)
the damage of an item of property that is a building, or of the neighbourhood of the building, causing the building to be—
(i)
useless for the purpose of deriving income; and
(ii)
demolished or abandoned for later demolition.
Repossession
(5)
The fourth event is the seller’s repossession of an item of property to which section EE 3 applies because the buyer wholly or partly fails to pay the consideration. The event is treated as occurring on the date on which the item is repossessed.
Unused geothermal well brought into use
(6)
The fifth event is, for a person’s geothermal well that is unavailable for use under section EE 6(4) because the geothermal energy proving period has ended, is when the person starts to—
(a)
use the well in deriving assessable income or carrying on a business for the purpose of deriving assessable income:
(b)
have the well available for use in deriving assessable income or carrying on a business for the purpose of deriving assessable income.
Statutory acquisition
(7)
The sixth event is the acquisition of an item of property by a person acting under statutory authority.
Cessation of ownership under section EE 4 or EE 5
(8)
The seventh event is the cessation of ownership of a fixture or improvement—
(a)
that a lessee is treated as having under section EE 4(2); or
(b)
that a person is treated as having under section EE 5(3).
Cessation of rights in intangible property
(9)
The eighth event is an occurrence that has the effect that the owner of an item of intangible property is no longer able, and will never be able, to exercise the rights that constitute or are part of the item.
Item leaving New Zealand permanently
(10)
The ninth event is described in section EZ 21(2) (Sections EE 45 and EE 47: permanent removal: allowance before 1 April 1995).
Item fitted to aircraft or aircraft engine in aircraft engine overhaul
(11)
The tenth event is the fitting of an item of property to an aircraft or aircraft engine as a replacement piece as part of an aircraft engine overhaul to which section DW 5 (Aircraft operators: aircraft engines and aircraft engine overhauls) applies.
Defined in this Act: aircraft engine, aircraft engine overhaul, amount, assessable income, business, deduction, depreciation loss, geothermal energy proving period, geothermal well, improvement, income year, lessee, New Zealand, own, pay, property
Compare: 2004 No 35 s EE 40
Section EE 47(1) heading: amended, on 30 March 2017, by section 63(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 47(1): amended, on 30 March 2017, by section 63(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 47(2): amended, on 1 April 2011 (applying for the 2011–12 and later income years), by section 53(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 47(2B) heading: replaced, on 23 March 2020 (with effect on 28 June 2018), by section 105 of the Taxation (KiwiSaver, Student Loans, and Remedial Matters) Act 2020 (2020 No 5).
Section EE 47(2B): inserted (with effect on 28 June 2018), on 18 March 2019, by section 165 of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EE 47(4) heading: substituted (with effect on 4 September 2010), on 29 August 2011, by section 26 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 47(4) heading: amended (with effect on 1 April 2020), on 30 March 2022, by section 81(1) (and see section 81(4) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 47(4): substituted (with effect on 4 September 2010), on 29 August 2011, by section 26 of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 47(4)(a): amended (with effect on 1 April 2020), on 30 March 2022, by section 81(2) (and see section 81(4) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 47(4)(b): amended (with effect on 1 April 2020), on 30 March 2022, by section 81(3) (and see section 81(4) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 47(11) heading: inserted, on 1 April 2017, by section 63(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 47(11): inserted, on 1 April 2017, by section 63(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 47 list of defined terms aircraft engine: inserted, on 1 April 2017, by section 63(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 47 list of defined terms aircraft engine overhaul: inserted, on 1 April 2017, by section 63(4) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
EE 48 Effect of disposal or event
Amount of depreciation recovery income
(1)
For the purposes of section EE 44, if the consideration is more than the item’s adjusted tax value on the date on which the disposal or the event occurs, the lesser of the following amounts is the amount of depreciation recovery income derived by the person:
(a)
the amount by which the consideration is more than the item’s adjusted tax value on the date on which the disposal or the event occurs; and
(b)
the amount given by subsections (1B) and (1C).
Amount for subsection (1)(b)
(1B)
The amount for the purposes of subsection (1)(b) is given by the following formula:
item depreciation loss + CZ 11 item amount + DB 64 item amount.
Definition of items in formula
(1C)
In the formula in subsection (1B),—
(a)
item depreciation loss is the total of the amounts of depreciation loss for which the person has been allowed deductions for the item:
(b)
CZ 11 item amount is the amount of any deduction allowed for the acquisition of the item, for the person, if the item is one to which section CZ 11 (Recovery of deductions for software acquired before 1 April 1993) applies:
(c)
DB 64 item amount is the amount of the capital contribution for the item, for the person, if the item is one to which section DB 64 (Capital contributions) applies.
Amount of depreciation loss
(2)
For the purposes of section EE 44, if the consideration is less than the item’s adjusted tax value on the date on which the disposal or the event occurs, the person has an amount of depreciation loss that is the amount by which the consideration is less than the item’s adjusted tax value on that date.
Income year of depreciation recovery income
(2B)
The person derives the depreciation recovery income in the income year that is the earliest income year in which the consideration can be reasonably estimated.
When subsection (2) does not apply
(3)
Subsection (2) does not apply if the item is a building unless—
(a)
the building has been rendered useless for the purpose of deriving income, and demolished or abandoned for later demolition as a result of damage to the building or of the neighbourhood of the building; and
(b)
[Repealed](c)
the damage is caused—
(i)
by a natural event not under the control of the person, an agent of the person, or an associated person; 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.
Defined in this Act: acquire, adjusted tax value, amount, building, capital contribution, consideration, deduction, depreciation loss, depreciation recovery income, dispose, income, income year
Compare: 2004 No 35 s EE 41
Section EE 48(1): amended (with effect on 4 September 2010), on 29 August 2011, by section 27(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 48(1)(b): substituted (with effect on 20 May 2010), on 28 May 2010, by section 80(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 48(1B) heading: inserted (with effect on 20 May 2010), on 28 May 2010, by section 80(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 48(1B): inserted (with effect on 20 May 2010), on 28 May 2010, by section 80(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 48(1C) heading: inserted (with effect on 20 May 2010), on 28 May 2010, by section 80(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 48(1C): inserted (with effect on 20 May 2010), on 28 May 2010, by section 80(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 48(2): amended (with effect on 4 September 2010), on 29 August 2011, by section 27(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 48(2B) heading: inserted (with effect on 4 September 2010), on 29 August 2011, by section 27(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 48(2B): inserted (with effect on 4 September 2010), on 29 August 2011, by section 27(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 48(3) heading: substituted (with effect on 4 September 2010), on 29 August 2011, by section 27(4) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 48(3)(a): substituted (with effect on 4 September 2010), on 29 August 2011, by section 27(5) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 48(3)(a): amended (with effect on 1 April 2020), on 30 March 2022, by section 82(1) (and see section 82(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EE 48(3)(b): repealed (with effect on 4 September 2010), on 29 August 2011, by section 27(6) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 48(3)(c): substituted (with effect on 4 September 2010), on 29 August 2011, by section 27(7) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 48 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 48 list of defined terms capital contribution: inserted (with effect on 20 May 2010), on 28 May 2010, by section 80(3) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
EE 49 Amount of depreciation recovery income when item partly used for business
Item to which this section applies
(1)
This section applies to an item of property that—
(a)
is an item to which this section applies, as described in section EE 46; and
(b)
is, at any time during the period the person owns it, dealt with in—
(i)
subpart DE (Motor vehicle expenditure); or
(ii)
any applicable paragraph in section EZ 11 (Amounts of depreciation recovery income and depreciation loss for part business use up to 2004–05 income year); or
(iii)
Depreciation recovery income
(2)
If the consideration referred to in section EE 44 is less than or equal to the cost of the item to the person, the amount of depreciation recovery income that the person has is an amount calculated using the formula in subsection (3).
No depreciation recovery income
(2B)
Despite subsections (1) and (2), there is no depreciation recovery income under this section for a motor vehicle which is dealt with under subpart DE if the person has made an election under section DE 2B(1) (Election to use kilometre rate method or costs method) to use the kilometre rate method described in section DE 12 (Kilometre rate method) for that vehicle.
Formula
(3)
The formula is—
(all deductions ÷ (base value − adjusted tax value))
× amount of depreciation recovery income.
Definition of items in formula
(4)
The items in the formula are defined in subsections (5) to (8).
All deductions
(5)
All deductions is all amounts of depreciation loss for which the person has been allowed a deduction for the item in each of the income years in which the person has owned the item.
Base value
(6)
Base value has the applicable one of the meanings in sections EE 57 to EE 59.
Adjusted tax value
(7)
Adjusted tax value is the item’s adjusted tax value on the date on which the disposal or the event occurs.
Amount of depreciation recovery income
(8)
Amount of depreciation recovery income is the amount described in section EE 48(1)(a).
Defined in this Act: adjusted tax value, amount, business, deduction, depreciation loss, depreciation recovery income, income year, own, property
Compare: 2004 No 35 s EE 42
Section EE 49(2B) heading: inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 80(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
Section EE 49(2B): inserted, on 1 April 2017 (applying for the 2017–18 and later income years), by section 80(1) of the Taxation (Business Tax, Exchange of Information, and Remedial Matters) Act 2017 (2017 No 3).
Section EE 49(8): amended (with effect on 1 April 2008), on 30 March 2017, by section 64(1) (and see section 64(2) and (3)) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
EE 50 Amount of depreciation loss when item partly used to produce income
When subsection (2) applies
(1)
Subsection (2) applies when—
(a)
a person has an amount of depreciation loss for an item of depreciable property for an income year, other than an amount arising under section EE 48(2); and
(b)
at a time during the income year, the item is partly used, or partly available for use, by the person—
(i)
in deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
(ii)
in a way that is subject to fringe benefit tax; and
(c)
at the same time, the item is partly used, or is partly available for use, by the person for a use that falls outside both paragraph (b)(i) and (ii); and
(d)
the item is not a motor vehicle to which subpart DE (Motor vehicle expenditure) applies.
Partial use: formula
(2)
The deduction the person is allowed for the amount of depreciation loss must not be more than the amount calculated using the formula—
depreciation loss × qualifying use days ÷ all days.
Definition of items in formula
(3)
In the formula in subsection (2),—
(a)
depreciation loss is the amount of depreciation loss for the income year:
(b)
qualifying use days is the number of days in the income year on which the person owns the item and uses it, or has it available for use, for a use that falls within subsection (1)(b)(i) or (ii):
(c)
all days is the number of days in the income year on which the person owns the item and uses it or has it available for use.
Other units of measurement
(4)
A unit of measurement other than days, whether relating to time, distance, or anything else, is to be used in the formula if it achieves a more appropriate apportionment.
When subsection (6) applies
(5)
Subsection (6) applies when—
(a)
a person has an amount of depreciation loss for an item of depreciable property arising under section EE 48(2); and
(b)
the item was, at any time during the period the person owned it, dealt with in—
(i)
subsection (2); or
(ii)
any applicable paragraph in section EZ 11 (Amounts of depreciation recovery income and depreciation loss for part business use up to 2004–05 income year); and
(c)
the item is not a motor vehicle to which subpart DE applies.
Deduction for depreciation loss: formula
(6)
The deduction the person is allowed for the amount of depreciation loss is calculated using the formula—
disposal depreciation loss × all deductions
÷ (base value − adjusted tax value at date).
Definition of items in formula
(7)
In the formula in subsection (6),—
(a)
disposal depreciation loss is the amount resulting from a calculation made for the item under section EE 48(2):
(b)
all deductions is all amounts of depreciation loss relating to the item for which the person has been allowed a deduction in each of the income years in which the person has owned the item:
(c)
base value has whichever is applicable of the meanings in sections EE 57 to EE 59:
(d)
adjusted tax value at date is the item’s adjusted tax value on the date on which the disposal or event occurs.
When subsection (9) applies
(8)
Subsection (9) applies when—
(a)
a person has an amount of depreciation loss for an item of depreciable property for an income year arising under section EE 48(2); and
(b)
in the income year in which the amount of depreciation loss arises, the person starts to use the item, or have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
(c)
at a time during the income year, the item is partly used, or partly available for use, by the person—
(i)
in deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
(ii)
in a way that is subject to fringe benefit tax; and
(d)
the item is not a motor vehicle to which subpart DE (Motor vehicle expenditure) applies.
Partial use: formula
(9)
The deduction the person is allowed for the amount of depreciation loss is calculated using the formula—
disposal depreciation loss × qualifying use days ÷ all days.
Definition of items in formula
(10)
In the formula in subsection (9),—
(a)
disposal depreciation loss is the amount resulting from a calculation made for the item under section EE 48(2):
(b)
qualifying use days is the number of days in the income year on which the person owns the item and uses it, or has it available for use, for a use that falls within subsection (8)(c)(i) or (ii):
(c)
all days is the number of days in the income year on which the person owns the item and uses it or has it available for use for any purpose.
Other units of measurement
(11)
A unit of measurement other than days, whether relating to time, distance, or anything else, is to be used in the formula if it achieves a more appropriate apportionment.
Defined in this Act: adjusted tax value, amount, assessable income, business, deduction, depreciable property, depreciation loss, fringe benefit tax, income year, motor vehicle, property
Compare: 2004 No 35 s FB 7
EE 51 Amount of depreciation recovery income when lost or stolen items recovered
When this section applies
(1)
This section applies when an item of property to which section EE 47(3) applies—
(a)
is recovered in a later income year; and
(b)
is still owned by the person; and
(c)
is still used or available for use by the person.
Person treated as acquiring item
(2)
The person is treated as having acquired the item, on the date of recovery, for its adjusted tax value at the start of the income year in which it was lost or stolen.
Person treated as deriving income: amount
(3)
The person is treated as deriving an amount of depreciation recovery income equal to the amount of depreciation loss that the person has under section EE 48(2) for which they have been allowed a deduction.
Person treated as deriving income: income year
(4)
The income year in which the person derives the depreciation recovery income is—
(a)
the income year in which the item is lost or stolen, if the person chooses that year; or
(b)
the income year in which the item is recovered, in any other case.
Defined in this Act: adjusted tax value, amount, deduction, depreciation loss, depreciation recovery income, income year, own, property
Compare: 2004 No 35 s EE 43
EE 52 Amount of depreciation recovery income when compensation received
When this section applies
(1)
This section applies when a person receives insurance, indemnity, or compensation for an item of property to which this section applies, as described in section EE 46, other than for an item that is lost, stolen, or irreparably damaged.
Compensation subtracted
(2)
An amount must be subtracted from the item’s adjusted tax value. The amount is the amount by which the insurance, indemnity, or compensation that the person receives is more than the expenditure that the person incurs because of the event for which the person receives the insurance, indemnity, or compensation.
Depreciation recovery income
(3)
If the item’s adjusted tax value becomes negative in an income year through the application of subsection (2), the negative amount is an amount of depreciation recovery income derived by the person in the income year.
Compensation derived when item no longer owned
(4)
If, in the absence of this subsection, the person would derive the amount of insurance, indemnity, or compensation after ceasing to own the item, the person is treated as deriving the amount immediately before the person ceases to own the item.
Defined in this Act: adjusted tax value, amount, depreciation recovery income, income year, property
Compare: 2004 No 35 s EE 44
Section EE 52(4) heading: inserted (with effect on 25 June 2013), on 27 February 2014, by section 49 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
Section EE 52(4): inserted (with effect on 25 June 2013), on 27 February 2014, by section 49 of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
EE 53 Unused geothermal well brought into use
When this section applies
(1)
This section applies to a person when an event occurs to which section EE 47(6) applies.
Person treated as acquiring well
(2)
The person is treated as having acquired the geothermal well on the day on which the event occurs for the cost of the well under this subpart before the event occurs.
Defined in this Act: acquire, geothermal well
Compare: 2004 No 35 s EE 44B
Interpretation provisions
EE 54 Cost: GST
When this section applies
(1)
This section applies when an amount of depreciation loss or an amount of depreciation recovery income is calculated by reference to the cost of an item of depreciable property to a person.
Cost reduced: input tax
(2)
The item’s cost is reduced by subtracting the amount, if any, of input tax applying to the supply of the item to the person. This subsection is overridden by subsections (3) and (4).
Deductions from output tax
(3)
The item’s cost is reduced by the amount of any adjustment taken into account in the income year under section 20(3)(e) of the Goods and Services Tax Act 1985.
Adjustments for output tax
(4)
The item’s cost is increased by adding an amount of deductible output tax that the person has for the income year.
Defined in this Act: amount, deductible output tax, depreciable property, depreciation loss, depreciation recovery income, GST, income year, input tax, output tax
Compare: 2004 No 35 s EE 45
Section EE 54(2): amended, on 1 April 2011, by section 54(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 54(3) heading: substituted, on 1 April 2011 (applying to taxable supplies made on or after 1 April 2011), by section 54(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 54(3): substituted, on 1 April 2011 (applying to taxable supplies made on or after 1 April 2011), by section 54(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 54(4) heading: substituted, on 1 April 2011 (applying to taxable supplies made on or after 1 April 2011), by section 54(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 54(4): substituted, on 1 April 2011 (applying to taxable supplies made on or after 1 April 2011), by section 54(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 54 list of defined terms deductible output tax: inserted, on 1 April 2011, by section 54(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EE 54 list of defined terms taxable supply: repealed, on 1 April 2011, by section 54(3) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Adjusted tax value
EE 55 Meaning of adjusted tax value
Meaning
(1)
Adjusted tax value means,—
(a)
for an item of depreciable property, the amount calculated using the formula in section EE 56:
(b)
for a pool, the total adjusted tax value determined under section EE 21.
Exception
(2)
Section FA 11B(6) (Adjustments for certain operating leases) overrides this section.
Defined in this Act: adjusted tax value, amount, depreciable property, pool
Compare: 2004 No 35 s EE 46
Section EE 55(1) heading: inserted (with effect on 1 April 2008), on 29 August 2011 (applying for the 2008–09 and later income years), by section 140(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EE 55(1)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 120(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EE 55(2) heading: inserted, on 1 April 2008, by section 357 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EE 55(2): inserted, on 1 April 2008, by section 357 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
EE 56 Formula
Formula
(1)
The formula referred to in section EE 55 is—
base value − total deductions.
Definition of items in formula
(2)
In the formula,—
(a)
base value has the applicable meaning in sections EE 57, EE 58, EE 59, and EZ 22(1) (Base value and total deductions in section EE 56: before 1 April 1995):
(b)
total deductions is defined in section EE 60.
Defined in this Act: deduction
Compare: 2004 No 35 s EE 47
EE 57 Base value in section EE 56 when none of sections EE 58, EE 59, and EZ 22(1) applies
When this section applies
(1)
This section applies when none of sections EE 58, EE 59, and EZ 22(1) (Base value and total deductions in section EE 56: before 1 April 1995) applies.
Base value
(2)
Base value is the cost of the item to the person.
Cost
(3)
In this section, “cost”
is qualified as follows:
(a)
expenditure is excluded from it if it is expenditure for which a person has been allowed a deduction for an amount of depreciation loss they have had under section EE 38(3) or EE 48(2) or the corresponding provision of the Income Tax Act 2004 or the Income Tax Act 1994; and
(b)
expenditure is not excluded from it if it is expenditure for which a person has been allowed a deduction for an amount of depreciation loss they have had under any other provision of this subpart or the corresponding provision of the Income Tax Act 2004 or the Income Tax Act 1994; and
(c)
expenditure is excluded from it if it is expenditure for which a person has been allowed a deduction under any other subpart or the corresponding provision of the Income Tax Act 2004 or the Income Tax Act 1994; and
(cb)
expenditure is included in it if the item is a patent application, a patent, a design registration, a design registration application, plant variety rights, or a resource consent under the Resource Management Act 1991 and the expenditure has given rise under section CG 7B (Disposals or applications after earlier deductions) to a corresponding amount of income relating to the item; and
(d)
expenditure—
(i)
is not excluded from it if it is described in section EZ 22(2)(a); and
(ii)
is excluded from it if it is described in section EZ 22(2)(b) or EZ 23BA(2) (Aircraft acquired before 2017–18 income year: adjusted tax value, base value, reduced; total deductions increased).
Defined in this Act: amount, deduction, depreciation loss, design registration, design registration application
Compare: 2004 No 35 s EE 48
Section EE 57(3)(cb): inserted (with effect on 1 April 2014 and applying for the 2014–15 and later income years), on 30 June 2014, by section 67(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EE 57(3)(cb): amended, on 23 December 2023, by section 6 of the Resource Management (Natural and Built Environment and Spatial Planning Repeal and Interim Fast-track Consenting) Act 2023 (2023 No 68).
Section EE 57(3)(cb): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 125(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 57(3)(d)(ii): amended, on 1 April 2017, by section 65 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 57 list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 125(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 57 list of defined terms design registration application: inserted (with effect on 1 April 2015), on 24 February 2016, by section 125(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EE 58 Base value in section EE 56 when no previous deduction
When this section applies
(1)
This section applies when all the following apply to the item:
(a)
it is not a building; and
(b)
it is not an item of petroleum-related depreciable property; and
(c)
it is not an item that the person—
(i)
acquired to use or have available for use in deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
(ii)
first used for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; and
(d)
it has been, since the person acquired it and first used it or had it available for use for any purpose, an item for which the person could not in any income year have been allowed a deduction for an amount of depreciation loss, whether because of the nature of the person’s use of the item or the person’s non-residence or for any other reason; and
(e)
in relation to the 1992–93 income year,—
(i)
it was acquired by the person after the end of that income year; or
(ii)
it was an item described in section EZ 22(3) (Base value and total deductions in section EE 56: before 1 April 1995).
Base value
(2)
Base value is the item’s market value when the person starts to use it, or to have it available for use, for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income, reduced for an item that is an aircraft engine or aircraft by an amount referred to in section EZ 23BA(2) (Aircraft acquired before 2017–18 income year: adjusted tax value, base value, reduced; total deductions increased) for the item.
Defined in this Act: acquire, aircraft engine, amount, assessable income, building, business, deduction, depreciation loss, income year, petroleum-related depreciable property
Compare: 2004 No 35 s EE 49
Section EE 58(2): amended, on 1 April 2017, by section 66(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 58 list of defined terms aircraft engine: inserted, on 1 April 2017, by section 66(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 58 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
EE 59 Base value in section EE 56 when property is petroleum-related depreciable property
When this section applies
(1)
This section applies when the item is an item of petroleum-related depreciable property to which both the following apply:
(a)
section EZ 22(1) (Base value and total deductions in section EE 56: before 1 April 1995) does not apply to it; and
(b)
the person (person A) acquires it from an associated person.
Base value
(2)
Base value is the lesser of—
(a)
the cost of the item to person A; and
(b)
the total of the amounts described in subsections (3) and (4).
First amount for purposes of subsection (2)(b)
(3)
The amount is the cost of the item to—
(a)
the associated person, if the associated person did not acquire the item from either person A or another person associated with person A; or
(b)
whoever owned the item, whether person A or the associated person, at the start of an unbroken chain of ownership made up of person A and 1 or more persons associated with person A.
Second amount for purposes of subsection (2)(b)
(4)
The amount is all expenditure incurred for the item by person A and the associated person or associated persons before the date on which person A acquired the item.
Cost and expenditure
(5)
In this section, “cost”
and “expenditure”
are qualified as follows:
(a)
expenditure is excluded from them if it is expenditure for which a person has been allowed a deduction for an amount of depreciation loss they have had under section EE 38(3) or EE 48(2) or the corresponding provision of the Income Tax Act 2004 or the Income Tax Act 1994; and
(b)
expenditure is not excluded from them if it is expenditure for which a person has been allowed a deduction for an amount of depreciation loss they have had under any other provision of this subpart or the corresponding provision of the Income Tax Act 2004 or the Income Tax Act 1994; and
(c)
expenditure is excluded from them if it is expenditure for which a person is allowed a deduction under any other subpart or the corresponding provision of the Income Tax Act 2004 or the Income Tax Act 1994; and
(d)
expenditure is excluded from them if it is expenditure for which a person would have been allowed a deduction under any other subpart if this Act had applied or the corresponding provision of the Income Tax Act 2004 or the Income Tax Act 1994 if the Act had applied.
Defined in this Act: acquire, amount, associated person, deduction, depreciation loss, own, petroleum-related depreciable property
Compare: 2004 No 35 s EE 50
EE 60 Total deductions in section EE 56
Total deductions
(1)
Total deductions is the total, calculated as at a particular time, of—
(a)
the amount described in subsection (2); and
(b)
the amount described in subsection (3); and
(c)
the amount of a deduction under section EE 25; and
(d)
the total amount of previous deductions under section DB 65 (Allowance for certain commercial buildings).
First amount for purposes of subsection (1)
(2)
The amount is all amounts that 1 or more of the following provisions has required to be subtracted from the item’s adjusted tax value since the start of the 1993–94 income year:
(a)
(b)
section EE 44(2) of the Income Tax Act 2004:
(c)
section EG 19(5) of the Income Tax Act 1994:
(d)
the provision described in section EZ 22(4) (Base value and total deductions in section EE 56: before 1 April 1995); and
(e)
section EZ 23BA(4) (Aircraft acquired before 2017–18 income year: adjusted tax value, base value, reduced; total deductions increased).
Second amount for purposes of subsection (1)
(3)
The amount is all deductions for amounts of depreciation loss, calculated using the method described in subsection (4), that, in the period described in subsection (5),—
(a)
the person was allowed for the item and,—
(i)
if the item is a patent, for the patent application in relation to which the item was granted:
(ib)
if the item is a design registration, for the design registration application in relation to which the item was granted:
(ii)
if the item is a geothermal well that a person acquired under section EE 53(2), for the well before the person acquired it under that section; or
(b)
the person would have been allowed if they had used the item wholly in deriving assessable income or carrying on a business for the purpose of deriving assessable income.
Treatment of assets not available for use
(3B)
Subsection (3)(b) does not apply in relation to an amount of depreciation loss for an item that is not available for use in deriving assessable income or carrying on a business for the purpose of deriving assessable income. However, this exclusion does not apply to an amount of depreciation loss for which the person has a deduction under section EE 39.
Method
(4)
The method is—
(a)
the depreciation method that the person used in each relevant income year; or
(b)
the diminishing value method, if the person did not make deductions for amounts of depreciation loss for the item.
Period
(5)
The period ends with the end of the income year before the income year in which the particular time occurs, and starts with,—
(a)
for an item to which section EE 57 applies,—
(i)
unless subparagraph (ii), (iii), or (iv) applies, the date on which the person acquired the item; or
(ii)
if the item is a geothermal well that a person acquired under section EE 53(2), the earliest date on which the person acquired the well under section EE 6(4) or otherwise; or
(iii)
if the item is a patent and the person acquired the patent application in relation to which the patent was granted, the date on which the person acquired the patent application; or
(iv)
if the item is a design registration and the person acquired the design registration application in relation to which the design registration was granted, the date on which the person acquired the design registration application; or
(b)
for an item to which section EE 58 applies,—
(i)
unless subparagraph (ii) or (iii) applies, the beginning of the month in which the person started to use the item, or to have it available for use for the purpose of deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
(ii)
if the item is a patent and the person acquired the patent application in relation to which the patent was granted, the beginning of the month in which the person acquired the patent application; or
(iii)
if the item is a design registration and the person acquired the design registration application in relation to which the design registration was granted, the beginning of the month in which the person acquired the design registration application; or
(c)
for an item to which section EE 59 applies, the date on which person A or the relevant associated person acquired the item; or
(d)
for an item to which section EZ 22(1) applies, to the item, the end of the 1992–93 income year.
Defined in this Act: acquire, adjusted tax value, amount, assessable income, associated person, business, deduction, depreciation loss, depreciation method, design registration, design registration application, diminishing value method, geothermal well, income year
Compare: 2004 No 35 s EE 51
Section EE 60(1)(d): inserted, on 1 April 2020, by section 9 of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 60(2)(d): amended, on 1 April 2017, by section 67(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 60(2)(e): inserted, on 1 April 2017, by section 67(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EE 60(2)(e): amended, on 29 March 2018 (with effect on 1 April 2017 and applying for the 2017–18 and later income years), by section 69(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
Section EE 60(3)(a)(ib): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 126(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 60(3B) heading: replaced (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 47(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EE 60(3B): inserted (with effect on 1 April 2008), on 7 September 2010 (applying for the 2008–09 and later income years), by section 31(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EE 60(3B): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 17 July 2013, by section 47(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EE 60(5)(a)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 126(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 60(5)(a)(ii): amended (with effect on 1 April 2008), on 2 November 2012, by section 37 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section EE 60(5)(a)(iv): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 126(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 60(5)(b)(i): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 126(4) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 60(5)(b)(iii): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 126(5) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 60 list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 126(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 60 list of defined terms design registration application: inserted (with effect on 1 April 2015), on 24 February 2016, by section 126(6) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Definitions
EE 61 Meaning of annual rate
Meaning
(1)
Annual rate means the annual depreciation rate applying to an item of depreciable property that a person owns. The rate is 1 of the rates described in subsections (2) to (5B).
1995–96 income year or later
(2)
The rate is the rate set by section EE 31(2)(a) or (b), or by section EE 31(3)(a), as applicable, if both the following apply to the item:
(a)
the person acquires it in their 1995–96 income year or a later income year; and
(b)
the item is not dealt with in any of subsections (3) to (5).
1995–96 income year or later: international aircraft
(3)
The rate is the rate set by section EE 31(2)(c), or by section EE 31(3)(b), as applicable, if the item is an international aircraft that the person acquires in their 1995–96 income year or a later income year.
1995–1996 income year or later: residential buildings with estimated useful lives of 50 years or more
(3B)
The rate is the rate set by section EE 31(2)(d), or by section EE 31(3)(c), as applicable, if the item is a residential building that—
(a)
has an economic rate or provisional rate of more than 0% due to an estimated useful life of 50 years or more; and
(b)
the person acquires in their 1995–96 income year or a later income year.
Fixed life intangible property
(4)
The rate is the rate set by section EE 33 if both the following apply to the item:
(a)
the item is an item of fixed life intangible property; and
(b)
the item is not an item of excluded depreciable property.
Patents, applications: complete specification before 1 April 2005
(5)
The rate is the rate set by section EE 34 if the item is a patent and section EE 34 applies to the item and the person.
Design registrations, applications
(5B)
The rate is the rate set by section EE 34B if the item is a design registration and section EE 34B applies to the item and the person.
1994–95 income year
(6)
The rate is the rate set by section EZ 13 (Annual rate for item acquired on or after 1 April 1993 and before end of person’s 1994–95 income year) if all the following apply to the item:
(a)
the person acquired it before the end of their 1994–95 income year; and
(b)
the item is not an item of fixed life intangible property; and
(c)
the item is not an item of excluded depreciable property.
Excluded depreciable property
(7)
The rate is the rate set by section EZ 15 (Annual rate for excluded depreciable property: 1992–93 tax year) if the item is an item of excluded depreciable property.
Residential buildings
(7B)
The rate is 0% for all depreciation methods, if the item is a residential building.
Exception
(8)
Section FA 11B(7) (Adjustments for certain operating leases) overrides this section.
Defined in this Act: acquire, annual rate, depreciable property, design registration, economic rate, estimated useful life, excluded depreciable property, fixed life intangible property, income year, international aircraft, own, provisional rate, residential building
Compare: 2004 No 35 s EE 52
Section EE 61(1): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 127(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 61(2): amended (with effect on 20 May 2010), on 28 May 2010, by section 81(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 61(3): amended (with effect on 20 May 2010), on 28 May 2010, by section 81(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 61(3B) heading: inserted, on 1 April 2011 (applying for the 2011–12 and later income years), by section 81(3) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 61(3B) heading: amended, on 1 April 2020, by section 10(1) (and see section 10(5) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 61(3B): inserted, on 1 April 2011 (applying for the 2011–12 and later income years), by section 81(3) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 61(3B): amended, on 1 April 2020, by section 10(2) (and see section 10(5) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 61(5B) heading: inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 127(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 61(5B): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 127(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 61(7B) heading: replaced, on 1 April 2020, by section 10(3) (and see section 10(5) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 61(7B): replaced, on 1 April 2020, by section 10(3) (and see section 10(5) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 61(8) heading: inserted, on 1 April 2008, by section 358 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EE 61(8): inserted, on 1 April 2008, by section 358 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EE 61 list of defined terms building: repealed, on 1 April 2020, by section 10(4)(a) (and see section 10(5) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 61 list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 127(3) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 61 list of defined terms economic rate: inserted, on 1 April 2011 (applying for the 2011–12 and later income years), by section 81(5) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 61 list of defined terms estimated useful life: inserted, on 1 April 2011 (applying for the 2011–12 and later income years), by section 81(5) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 61 list of defined terms provisional rate: inserted, on 1 April 2011 (applying for the 2011–12 and later income years), by section 81(5) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 61 list of defined terms residential building: inserted, on 1 April 2020, by section 10(4)(b) (and see section 10(5) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 61 list of defined terms special excluded depreciable property: repealed, on 1 April 2020, by section 10(4)(a) (and see section 10(5) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
EE 62 Meaning of depreciable intangible property
Meaning
(1)
Depreciable intangible property means the property listed in schedule 14 (Depreciable intangible property).
Criteria for listing in schedule 14
(2)
For property to be listed in schedule 14, the criteria are as follows:
(a)
it must be intangible; and
(b)
it must have a finite useful life that can be estimated with a reasonable degree of certainty on the date of its acquisition.
Schedule 14 prevails
(3)
Property that is listed in schedule 14 is depreciable intangible property even if the criteria are not met.
Defined in this Act: acquire, depreciable intangible property, property
Compare: 2004 No 35 s EE 53
EE 63 Meaning of estimated useful life
Meaning for item of depreciable property, except for copyright in sound recording
(1)
Estimated useful life, for an item of depreciable property, other than a copyright in a sound recording, means the period over which the item might reasonably be expected to be useful in deriving assessable income or carrying on a business for the purpose of deriving assessable income, taking into account—
(a)
the passage of time, likely wear and tear, exhaustion, and obsolescence; and
(b)
an assumption of normal and reasonable maintenance.
Meaning for copyright in sound recording
(2)
Estimated useful life, for a copyright in a sound recording, means the period from the time at which the copyright might reasonably be expected to be first useful in deriving assessable income until the end of the income year in which it might reasonably be expected that 90% of all the income that will be derived from it has been derived.
Defined in this Act: assessable income, business, depreciable property, estimated useful life, income year, sound recording
Compare: 2004 No 35 s EE 54
EE 64 Meaning of excluded depreciable property
Meaning
(1)
Excluded depreciable property means, for a person,—
(a)
depreciable property for whose acquisition or construction the person entered into a binding contract before 16 December 1991; or
(b)
depreciable property that the person used or had available for use for any purpose whatever within New Zealand, other than as trading stock, before 1 April 1993; or
(c)
depreciable property that is an intangible item that the person used or had available for use before 1 April 1993; or
(d)
depreciable property that is or has been a qualifying asset for the person; or
(e)
depreciable property to the extent to which it is or has been a qualifying improvement for the person.
Exclusion
(2)
Excluded depreciable property does not include property to which both the following apply:
(a)
it existed at the end of the 1992–93 income year; and
(b)
the Commissioner allowed it to be accounted for in that income year using the standard value method, the replacement value method, or the annual revaluation method.
Another exclusion[Repealed]
(3)
[Repealed]Defined in this Act: Commissioner, depreciable property, excluded depreciable property, income year, New Zealand, property, qualifying improvement, qualifying asset, trading stock
Compare: 2004 No 35 s EE 55
Section EE 64(1)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 64(3) heading: repealed, on 1 April 2020, pursuant to section 11(1) (and see section 11(3) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 64(3): repealed, on 1 April 2020, by section 11(1) (and see section 11(3) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 64 list of defined terms special excluded depreciable property: repealed, on 1 April 2020, by section 11(2) (and see section 11(3) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
EE 65 Meaning of maximum pooling value
Meaning
(1)
Maximum pooling value, for an item of depreciable property, means the greater of—
(a)
$5,000; and
(b)
the value set in a determination issued under section 91AAL of the Tax Administration Act 1994 applying to the item.
Increase in specified sum
(2)
The Governor-General may make an Order in Council increasing the sum specified in subsection (1)(a).
Secondary legislation
(3)
An Order in Council under subsection (2) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: depreciable property, maximum pooling value
Compare: 2004 No 35 s EE 56
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | PCO must publish it on the legislation website and notify it in the Gazette | LA19 s 69(1)(c) | ||
| Presentation | The Minister must present it to the House of Representatives | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
Section EE 65(1)(a): the sum specified in this paragraph was increased, on 1 July 2015 (applying for the 2015–16 income year and later income years), by clause 3(1) of the Income Tax (Maximum Pooling Value) Order 2015 (LI 2015/141).
Section EE 65(3) heading: inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Section EE 65(3): inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
EE 66 Meaning of poolable property
Meaning
(1)
Poolable property, for an income year, means an item of depreciable property that a person owns to which subsections (2) to (4) apply.
Not a building
(2)
The item is not a building.
Maximum pooling value or globo method
(3)
The item—
(a)
is acquired in the income year for a cost equal to or less than its maximum pooling value; or
(b)
was previously accounted for separately but has, as at the start of the income year, an adjusted tax value equal to or less than its maximum pooling value; or
(c)
was accounted for at the end of the 1992–93 income year using, with the Commissioner’s permission, the globo accounting method.
Wholly used or subject to fringe benefit tax
(4)
The item—
(a)
is wholly used or available for use by the person in deriving assessable income or carrying on a business for the purpose of deriving assessable income; or
(b)
to the extent to which it is not wholly used or available for use by the person in deriving assessable income or carrying on a business for the purpose of deriving assessable income, is used in a way that is subject to fringe benefit tax.
Defined in this Act: acquire, adjusted tax value, assessable income, building, business, Commissioner, depreciable property, fringe benefit tax, income year, maximum pooling value, own, poolable property
Compare: 2004 No 35 s EE 57
Section EE 66 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
EE 67 Other definitions
In this Act,—
depreciation method means a method described in section EE 12
diminishing value method means the method of calculating an amount of depreciation loss for an item of depreciable property by subtracting, in each income year, a constant percentage of the item’s adjusted tax value from the item’s adjusted tax value
diminishing value rate means the rate that a person using the diminishing value method applies to an item of depreciable property
economic rate means the economic depreciation rate of an item of depreciable property, set under sections EE 27 to EE 30
estimated residual market value means, for an item of depreciable property, its market value at the end of its estimated useful life, estimated reasonably as at the date of acquisition and based on an assumption of normal and reasonable maintenance over its estimated useful life
fixed life intangible property means property that—
(a)
is depreciable intangible property; and
(b)
has a legal life that could reasonably be expected, on the date of the property’s acquisition, to be the same length as the property’s remaining estimated useful life
improvement means an alteration, extension, or repair of an item of depreciable property that increases its capital value
international aircraft means a jet-engined aircraft that a person uses in an income year mainly in regular commercial service to transport passengers between New Zealand and any other place
legal life,—
(a)
for an item to which paragraphs (b) to (d) do not apply, means the number of years, months, and days for which an owner’s interest in an item of intangible property exists under the contract or statute that creates the owner’s interest, assuming that the owner exercises any rights of renewal or extension that are either essentially unconditional or conditional on the payment of predetermined fees:
(b)
for an item that is a patent application, a design registration application, a patent, or a design registration, means the legal life under paragraph (a) that a patent or design registration would have if granted when the relevant application is first lodged:
(bb)
for an item that is industrial artistic copyright, means the number of years, months, and days for which protection against copyright infringement is available as a result of section 75(1)(c) to (e) of the Copyright Act 1994:
(c)
for an item that is plant variety rights, means the total of—
(i)
the legal life that the rights would have under paragraph (a); and
(ii)
the number of whole calendar months during which the person owns the plant variety rights application in relation to which the rights are granted:
(d)
for a person and a right (a land right) that is a leasehold estate, or a licence to use land, means the number of years, months, and days for which the person or an associated person has an owner’s interest in the land right, or in a consecutive or successive land right, under the contract or statute that creates the owner’s interest, determined—
(i)
when the person acquires the owner’s interest; and
(ii)
assuming that the person or associated person exercises rights of renewal, extension, or further grant that are either essentially unconditional or conditional on the payment of predetermined fees
petroleum-related depreciable property means depreciable property that is—
(a)
petroleum drilling rigs; or
(b)
support vessels for offshore petroleum drilling rigs; or
(c)
support vessels for offshore petroleum production platforms
pool means items of depreciable property that a person chooses under section EE 12 to depreciate as a pool using the pool method
pool method means the method of calculating an amount of depreciation loss set out in section EE 21
provisional rate means a provisional rate as described in section EE 35
special excluded depreciable property [Repealed]
special rate means a special rate as described in section EE 35
straight-line method means the method of calculating an amount of depreciation loss for an item of depreciable property by subtracting, in each income year, a constant percentage of the item’s cost, to its owner, from the item’s adjusted tax value
straight-line rate means the rate that a person using the straight-line method applies to an item of depreciable property.
Defined in this Act: acquire, adjusted tax value, amount, building, depreciable intangible property, depreciable property, depreciation loss, depreciation method, design registration, design registration application, diminishing value method, diminishing value rate, economic rate, estimated residual market value, estimated useful life, fixed life intangible property, improvement, income year, industrial artistic copyright, international aircraft, legal life, New Zealand, own, pay, petroleum, petroleum-related depreciable property, plant variety rights, pool, pool method, property, provisional rate, special excluded depreciable property, special rate, straight-line method, straight-line rate
Compare: 2004 No 35 s EE 58
Section EE 67 legal life paragraph (a): amended, on 1 April 2015, by section 68(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EE 67 legal life paragraph (b): replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 128(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 67 legal life paragraph (bb): inserted (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 128(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 67 legal life paragraph (c)(ii): amended, on 1 April 2015, by section 68(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EE 67 legal life paragraph (d): inserted, on 1 April 2015, by section 68(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EE 67 special excluded depreciable property: repealed, on 1 April 2020, by section 12(1) (and see section 12(2) for application) of the COVID-19 Response (Taxation and Social Assistance Urgent Measures) Act 2020 (2020 No 8).
Section EE 67 list of defined terms building: inserted (with effect on 30 July 2009), on 28 May 2010, by section 84 of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Section EE 67 list of defined terms design registration: inserted (with effect on 1 April 2015), on 24 February 2016, by section 128(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 67 list of defined terms design registration application: inserted (with effect on 1 April 2015), on 24 February 2016, by section 128(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 67 list of defined terms industrial artistic copyright: inserted (with effect on 1 April 2015), on 24 February 2016, by section 128(2) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EE 67 list of defined terms special excluded depreciable property: inserted, on 1 April 2011 (applying for the 2011–12 and later income years), by section 83(2) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
Subpart EF—Taxes and levies
Contents
EF 1 Fringe benefit tax
Fringe benefit tax for which a deduction is allowed may be deducted only in the income year in which the relevant fringe benefits are provided or granted, whether or not the tax actually becomes due and payable in the income year.
Defined in this Act: deduction, fringe benefit tax, income year, pay
Compare: 2004 No 35 s EF 1
EF 2 Employer’s superannuation contribution tax
An amount of employer’s superannuation contribution tax (ESCT) for which a deduction is allowed may be deducted only in the income year in which the employer’s superannuation cash contributions to which the tax relates are made, whether or not the tax actually becomes due and payable in the income year.
Defined in this Act: deduction, employer’s superannuation cash contribution, ESCT, income year, pay
Compare: 2004 No 35 s EF 2
Section EF 2: amended (with effect on 1 April 2008), on 6 October 2009, by section 121(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EF 2 list of defined terms employer’s superannuation cash contribution: inserted (with effect on 1 April 2008), on 6 October 2009, by section 121(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EF 2 list of defined terms employer’s superannuation contribution: repealed (with effect on 1 April 2008), on 6 October 2009, by section 121(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EF 3 Accident compensation levies and premiums
Timing of deduction
(1)
A deduction that an employer or self-employed person is allowed for an Accident Compensation Corporation (ACC) levy or premium is allocated to the income year in which it becomes due and payable, except as provided in subsection (2) or (3).
Earlier income year
(2)
If a deduction for an ACC levy or premium has been allocated to an income year earlier than the income year in which the levy or premium becomes due and payable and, because of the time bar or for another reason, the Commissioner cannot lawfully amend the assessment for the income year, the deduction is allocated to the income year in which it was allowed.
Balance dates between 1 October and 6 April
(3)
If a person’s income year ends on a balance date falling between 1 October and 6 April (both dates inclusive), an ACC levy or premium that is due on a date in schedule 3, part A, column H (Payment of provisional tax and terminal tax) is treated as if it were due and payable on the relevant date in schedule 3, part A, column G for the person’s corresponding income year.
References to dates in schedule 3
(4)
For the purposes of subsection (3), references to the date in schedule 3, part A, columns G and H (which refer to months only and not days) are references to the day in the relevant month that is fixed by the following:
(a)
the definition of instalment date in section YA 1 (Definitions); and
(b)
sections RA 3 (Terminal tax obligations), RC 1(2), and RC 20 to RC 24 (which relate to provisional tax instalments in transitional years).
Meaning of ACC levy or premium
(5)
In this section, ACC levy or premium means any of the following levies, premiums, or penalties:
(a)
the following levy or premium:
(i)
a levy to fund the Work Account under section 168 of the Accident Compensation Act 2001; or
(ii)
an employer’s premium to fund the Employers’ Account under section 281B of the Accident Insurance Act 1998:
(b)
[Repealed](c)
the following levy or premium:
(i)
a levy to fund the Work Account under section 168B or 211 of the Accident Compensation Act 2001; or
(ii)
a premium to fund the Self-Employed Work Account under section 300 of the Accident Insurance Act 1998:
(d)
the following levy or premium:
(i)
a levy to fund the Earners’ Account under section 219(1) of the Accident Compensation Act 2001; or
(ii)
a premium to fund the Earners’ Account under section 283(1) of the Accident Insurance Act 1998:
(e)
an Earners’ Account levy under section 283(2) of the Accident Insurance Act 1998:
(f)
a levy to meet the costs of the Regulator under section 236 of the Accident Insurance Act 1998:
(g)
a contribution to the Insolvent Insurers Fund under section 246 or 247 of the Accident Insurance Act 1998:
(h)
a levy or penalty payable to the Non-Compliers Fund under section 263 of the Accident Insurance Act 1998:
(i)
a base premium under sections 466 to 470 of the Accident Insurance Act 1998.
Defined in this Act: ACC levy or premium, Commissioner, deduction, employer, income year, pay, time bar
Compare: 2004 No 35 s EF 3
Section EF 3(5)(a)(i): amended, on 21 December 2010, by section 189 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EF 3(5)(b): repealed, on 3 March 2010, by section 49 of the Accident Compensation Amendment Act 2010 (2010 No 1).
Section EF 3(5)(c)(i): amended, on 21 December 2010, by section 189 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EF 3(5)(d)(i): amended, on 21 December 2010, by section 189 of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EF 3(5)(e): substituted, on 3 March 2010, by section 49 of the Accident Compensation Amendment Act 2010 (2010 No 1).
EF 4 Use of money interest payable by Commissioner
Timing of income
(1)
Income that is interest payable by the Commissioner to a person under Part 7 of the Tax Administration Act 1994 is allocated to the income year in which the Commissioner pays the interest.
Interest paid in same year as liability arises[Repealed]
(2)
[Repealed]Effect of amended assessment[Repealed]
(3)
[Repealed]Amended assessment in same year[Repealed]
(4)
[Repealed]Defined in this Act: Commissioner, income, income year, interest, pay
Compare: 2004 No 35 s EF 4
Section EF 4(1): amended (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 28(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4(2) heading: repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), pursuant to section 28(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4(2): repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 28(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4(3) heading: repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), pursuant to section 28(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4(3): repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 28(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4(4) heading: repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), pursuant to section 28(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4(4): repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 28(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4 list of defined terms assessment: repealed (with effect on 1 April 2011), on 29 August 2011, by section 28(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4 list of defined terms notice: repealed (with effect on 1 April 2011), on 29 August 2011, by section 28(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 4 list of defined terms tax year: repealed (with effect on 1 April 2011), on 29 August 2011, by section 28(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
EF 5 Use of money interest payable by person
Timing of deduction
(1)
A deduction for interest payable by a person to the Commissioner under Part 7 of the Tax Administration Act 1994 is allocated to the income year in which the person pays the interest.
Assessment made in same year as liability arises[Repealed]
(2)
[Repealed]Effect of amended assessment[Repealed]
(3)
[Repealed]Terminal amended assessment[Repealed]
(4)
[Repealed]Amended assessment in same year[Repealed]
(5)
[Repealed]Defined in this Act: Commissioner, deduction, income year, pay
Compare: 2004 No 35 s EF 5
Section EF 5(1): substituted (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 29(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5(2) heading: repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), pursuant to section 29(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5(2): amended (with effect on 1 April 2008), on 2 November 2012, by section 38 of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section EF 5(2): repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 29(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5(3) heading: repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), pursuant to section 29(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5(3): repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 29(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5(4) heading: repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), pursuant to section 29(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5(4): repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 29(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5(5) heading: repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), pursuant to section 29(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5(5): repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 29(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms assessment: repealed (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms Commissioner: substituted (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms deduction: substituted (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms income tax liability: repealed (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms income year: substituted (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms interest: repealed (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms liquidation: repealed (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms notice: repealed (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms pay: substituted (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Section EF 5 list of defined terms tax year: repealed (with effect on 1 April 2011), on 29 August 2011, by section 29(3) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
EF 6 Different tax years
[Repealed]Section EF 6: repealed (with effect on 1 April 2011), on 29 August 2011 (applying for the 2011–12 and later income years), by section 30(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
Subpart EG—Recognition of accounting treatment
Contents
EG 1 Election to use balance date used in foreign country
When this section applies
(1)
This section applies when—
(a)
a person has foreign source income or foreign expenditure that is taken into account in determining the income tax, not merely the withholding tax, payable by them in a foreign country or territory; and
(b)
the foreign source income or foreign expenditure has been included in 1 of their income tax returns in the country or territory; and
(c)
the annual income tax balance date that is relevant for them for the income tax return in the country or territory falls in a period that is an income year for them; and
(d)
if the person did not make an election under this section,—
(i)
the foreign source income would be allocated to their previous income year; or
(ii)
the foreign expenditure would be a deduction allocated to the previous income year if the only income of the person were foreign source income to which this section applies.
Election to allocate
(2)
If the person has not already included the foreign source income or foreign expenditure in their return of income for the previous tax year, they may choose to allocate the foreign source income or the foreign expenditure to the income year referred to in subsection (1)(c).
How election made
(3)
The person makes the election by including the foreign source income or foreign expenditure in their return of income for the income year referred to in subsection (1)(c).
What election applies to
(4)
The election applies to all the person’s foreign source income and foreign expenditure to which subsection (1) applies, except for—
(a)
income or expenditure under the financial arrangements rules, unless the Commissioner notifies the person that the election can apply; or
(b)
dividends, unless the Commissioner notifies the person that the election can apply and the person is not a company; or
(c)
attributed controlled foreign company (CFC) income; or
(d)
foreign investment fund (FIF) income or income derived from an attributing interest; or
(e)
in the case of foreign expenditure, foreign expenditure that would be allowed as a deduction if the only income of the person were income to which paragraphs (a) to (d) apply.
Timing of income
(5)
The foreign source income and foreign expenditure to which the election applies is allocated to the income year referred to in subsection (1)(c).
Election treated as continuing
(6)
An election made by a person under subsection (2) applies for the income year referred to in subsection (1)(c) and all later income years, unless—
(a)
the person seeks the Commissioner’s agreement to revoke the election, and the Commissioner notifies them that they may revoke the election; or
(b)
the person’s net income for the relevant income year would be more than $100,000 if their only income in the income year were foreign source income.
Net income of more than $100,000
(7)
If subsection (6)(b) applies,—
(a)
foreign source income and foreign expenditure is allocated to the income year referred to in subsection (1)(c) only if it was derived or incurred in that year; and
(b)
foreign source income and foreign expenditure to which the election would have applied if subsection (6)(b) had not existed is allocated to the previous income year; and
(c)
if necessary, the previous tax year’s return is amended.
Factors considered
(8)
In deciding whether to agree to an election applying to income or expenditure under the financial arrangements rules or dividends, the Commissioner must consider—
(a)
whether the person is likely to incur significant compliance costs if the Commissioner does not agree to the election; and
(b)
the risk to the revenue if the Commissioner agrees to the election; and
(c)
any other factors the Commissioner considers relevant.
Person ceasing to be, or becoming, resident
(9)
If the person ceases to be, or becomes, resident in New Zealand, this section applies in the same way as for other persons except that—
(a)
it does not apply to income or expenditure that is allocated, other than under this section, to a period when the person is not resident in New Zealand; and
(b)
if it allocates foreign source income derived or foreign expenditure incurred while the person is resident in New Zealand to a period after the person has ceased to be resident in New Zealand,—
(i)
the foreign source income is assessable income in the income year in which the foreign source income is allocated under this section, despite section BD 1(5)(c) (Income, exempt income, excluded income, non-residents’ foreign-sourced income, and assessable income); and
(ii)
the foreign expenditure is allowed as a deduction in the income year to which the foreign expenditure is allocated under this section.
Some definitions
(10)
In this section,—
annual income tax balance date includes a date that is substantially equivalent to an annual income tax balance date
foreign expenditure means expenditure that is incurred in deriving foreign source income
foreign source income means income that does not have a source in New Zealand and that is not exempt income.
Defined in this Act: annual income tax balance date, assessable income, attributed CFC income, attributing interest, Commissioner, company, deduction, dividend, exempt income, FIF income, financial arrangements rules, foreign expenditure, foreign source income, income, income tax, income year, net income, notify, pay, resident in New Zealand, return of income, source in New Zealand, tax year
Compare: 2004 No 35 s EG 1
Section EG 1(4)(a): amended, on 2 June 2016, by section 16(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EG 1(4)(b): amended, on 2 June 2016, by section 16(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EG 1(6): amended (with effect on 1 April 2008 and applying for the 2008–09 and later income years), on 30 June 2014, by section 69(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EG 1(6)(a): replaced, on 2 June 2016, by section 16(3) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EG 1(10) foreign source income: amended, on 21 December 2010, by section 55(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EG 1 list of defined terms derived from New Zealand: repealed, on 21 December 2010, by section 55(2)(a) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
Section EG 1 list of defined terms notify: inserted, on 2 June 2016, by section 16(4) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EG 1 list of defined terms source in New Zealand: inserted, on 21 December 2010, by section 55(2)(b) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
EG 2 Adjustment for changes to accounting practice
When this section applies
(1)
This section applies in an income year (the year of change) when a person changes from—
(a)
a cash accounting method to an accrual accounting method of calculating their income tax liability; or
(b)
an accrual accounting method to a cash accounting method of calculating their income tax liability.
From cash to accrual accounting method
(2)
If subsection (1)(a) applies,—
(a)
an amount owed to the person on the last day of the income year before the year of change is income of the person in the year of change; and
(b)
an amount owed by the person on the last day of the income year before the year of change is allowed as a deduction in the year of change.
From accrual to cash accounting method
(3)
If subsection (1)(b) applies,—
(a)
an amount equal to the total of all amounts owing by the person in the year of change that have been allowed as a deduction in earlier income years is income of the person in the year of change; and
(b)
an amount equal to the total of all amounts owing to the person in the year of change that have been treated as income of the person in earlier income years is allowed as a deduction in the year of change.
Some definitions
(4)
In this section,—
accrual accounting method means a method of accounting that is regarded as accrual accounting under generally accepted accounting practice
cash accounting method means a method of accounting by which the income tax liability of a person is calculated by reference to cash receipts or outgoings.
Defined in this Act: accrual accounting method, amount, cash accounting method, deduction, generally accepted accounting practice, income, income tax liability, income year
Compare: 2004 No 35 s EG 2
EG 3 Allocation of income, deductions, and tax credits by portfolio tax rate entity
[Repealed]Section EG 3: repealed, on 1 April 2010 (applying for the 2010–11 and later income years), by section 122(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Subpart EH—Income equalisation schemes
Contents
Introductory provisions
EH 1 Income equalisation schemes
Description
(1)
An income equalisation scheme allows a person to reduce their net income for a tax year by making a deposit with the Commissioner for the corresponding income year.
Two schemes
(2)
The 2 income equalisation schemes are—
(a)
the main income equalisation scheme, described in sections EH 3 to EH 36 and EZ 80:
(b)
[Repealed](c)
the thinning operations income equalisation scheme, described in sections EH 63 to EH 79.
Meaning of terms
(3)
Terms used in the 2 schemes are defined as follows:
(a)
terms used specifically in the main income equalisation scheme are defined in sections EH 34 to EH 36:
(b)
[Repealed](c)
terms used specifically in the thinning operations income equalisation scheme are defined in sections EH 78 and EH 79.
Defined in this Act: adverse event income equalisation scheme, Commissioner, corresponding income year, deposit, income, main income equalisation scheme, net income, person, tax year, thinning operations income equalisation scheme
Compare: 2004 No 35 s EH 1
Section EH 1(2) heading: amended, on 18 March 2019, by section 166(1) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EH 1(2): amended (with effect on 18 March 2019), on 26 June 2019, by section 61 of the Taxation (Annual Rates for 2019–20, GST Offshore Supplier Registration, and Remedial Matters) Act 2019 (2019 No 33).
Section EH 1(2)(a): amended (with effect on 1 April 2017), on 30 March 2021, by section 36(1) (and see section 36(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EH 1(2)(b): repealed, on 18 March 2019, by section 166(2) (and see section 166(5) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EH 1(3): amended, on 18 March 2019, by section 166(3) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EH 1(3)(b): repealed, on 18 March 2019, by section 166(4) (and see section 166(5) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 2 Deposits to be paid into Crown Bank Account
Every deposit a person makes with the Commissioner under a scheme referred to in section EH 1(2)—
(a)
is public money; and
(b)
must be paid into a Crown Bank Account.
Defined in this Act: Commissioner, deposit, pay, person
Section EH 2: replaced, on 30 March 2022, by section 83 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Main income equalisation scheme
Application
EH 3 Persons to whom main income equalisation scheme applies
Meaning of farmer, fisher, and forester for main income equalisation scheme
(1)
The main income equalisation scheme applies to—
(a)
a farmer, which means a person carrying on a farming or agricultural business on land in New Zealand; or
(b)
a fisher, which means a person carrying on a fishing business; or
(c)
a forester, which means a person who—
(i)
derives income from forestry; and
(ii)
is not a company, a public authority, a Maori authority, or an unincorporated body.
Meaning of person for main income equalisation scheme
(2)
In the main income equalisation scheme, person means a farmer, fisher, or forester.
Defined in this Act: business, company, farmer, fisher, fishing business, forester, income from forestry, main income equalisation scheme, Maori authority, New Zealand, person, public authority
Compare: 2004 No 35 s EH 3
Deposits and accounts
EH 4 Main deposit
Deposit for business or forestry
(1)
A person may make a payment to the Commissioner for entry in their main income equalisation account for an accounting year as follows:
(a)
a farmer may make a payment for the farmer’s farming or agricultural business:
(b)
a fisher may make a payment for the fisher’s fishing business:
(c)
a forester may make a payment for the forester’s income from forestry.
Upper limit of deposit
(2)
A person must not make, for an accounting year, deposits that in total are more than their main maximum deposit for the tax year.
Lower limit of deposit
(3)
A person must not make, for an accounting year, a deposit less than the lesser of—
(a)
$200; and
(b)
the difference between—
(i)
the total of the deposits the person has previously made for the accounting year; and
(ii)
the person’s main maximum deposit for the accounting year.
Time of making deposit
(4)
A person makes a deposit for an accounting year by—
(a)
making the deposit during the accounting year; or
(b)
doing both the following:
(i)
making the deposit during the specified period for the accounting year; and
(ii)
at the time of making it, giving the Commissioner notice that the deposit is for the accounting year; or
(c)
doing both the following:
(i)
making the deposit within a time that is after the end of the specified period for the accounting year but that is allowed by the Commissioner in a case or class of cases; and
(ii)
at the time of making it, giving the Commissioner notice that the deposit is for the accounting year.
Limit on making deposit
(5)
If a refund has been made to a person for an accounting year under section EH 13 or EH 15, the person may later make a deposit for that accounting year only if the Commissioner is satisfied, before the deposit is made, that all the refund has been used to develop or expand a farmer’s business, if the person is a farmer, or a fishing business, if the person is a fisher, or the means by which a forester derives income from forestry, if the person is a forester, or has been used for the purpose stated in section EH 15(3)(a) for which the refund was made.
Defined in this Act: accounting year, business, Commissioner, deposit, farmer, fisher, fishing business, forester, income from forestry, main deposit, main income equalisation account, main maximum deposit, notice, pay, person, specified period
Compare: 2004 No 35 s EH 4
Section EH 4(5): amended, on 18 March 2019, by section 167(1) (and see section 167(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 5 Main income equalisation account
Person’s account
(1)
The Commissioner must keep a main income equalisation account in the name of every person who makes a deposit with the Commissioner.
Deposits in account
(2)
Every deposit a person makes with the Commissioner must be entered in the person’s main income equalisation account.
Amounts in accounts
(3)
The only amounts that may be entered in a person’s main income equalisation account are—
(a)
deposits made by the person with the Commissioner; and
(b)
interest paid under section EH 6.
Amounts not available to others
(4)
Despite section FC 2 (Transfer at market value), amounts entered in a person’s main income equalisation account must not, while they are in the account,—
(a)
be assigned or charged in any way; or
(b)
pass by operation of law to, or into the custody or control of, someone else, except when the person is bankrupt or has been put into liquidation; or
(c)
be assets for the payment of the person’s debts or liabilities, except when the person is bankrupt or has been put into liquidation; or
(d)
be assets for the payment of the debts or liabilities of a dead person’s estate.
Amounts available only for refunds
Defined in this Act: amount, Commissioner, deposit, interest, liquidation, main income equalisation account, pay, person
Compare: 2004 No 35 s EH 5
Section EH 5(5): amended, on 30 March 2021, by section 37 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Interest
EH 6 Interest on deposits in main income equalisation account
No interest payable
(1)
No interest is payable on a deposit in a main income equalisation account that is refunded within 1 year of the date of deposit.
Interest payable
(2)
Interest is payable on every other deposit in a main income equalisation account.
Period
(3)
Interest is computed with daily rests from the date of acknowledgment of the receipt of the deposit until the date the deposit is refunded.
Date to which accrues
(4)
Interest on a deposit accrues until the earlier of—
(a)
31 March in each year; and
(b)
the date the deposit is refunded.
Added to deposit
(5)
Accrued interest on a deposit is added to the deposit.
Rate
(6)
The interest rate is 3% a year.
Defined in this Act: deposit, interest, main income equalisation account, pay, year
Compare: 2004 No 35 s EH 6
Deduction
EH 7 Deduction of deposit
When this section applies
(1)
This section applies when a person is allowed a deduction under section DQ 1 (Main income equalisation scheme).
Amount of deduction
(2)
The amount of the deduction is the lesser of—
(a)
the total of the person’s deposits for the accounting year; and
(b)
their main maximum deposit for the accounting year.
Timing of deduction
(3)
The person is allowed the deduction in the accounting year.
Defined in this Act: accounting year, amount, corresponding income year, deduction, deposit, main maximum deposit, person
Compare: 2004 No 35 s EH 7
Refunds: automatic
EH 8 Refund of excess deposit
When this section applies
(1)
This section applies when a person’s deposits for an accounting year are more than their main maximum deposit for the accounting year.
Refund
(2)
The Commissioner must refund the excess to the person as soon as practicable after the date the deposit ends.
Defined in this Act: accounting year, Commissioner, date the deposit ends, deposit, main maximum deposit, person
Compare: 2004 No 35 s EH 8
EH 9 Income does not include excess deposit
A refund under section EH 8 is excluded income under section CX 51 (Income equalisation schemes).
Defined in this Act: excluded income
Compare: 2004 No 35 s EH 9
EH 10 Refund at end of 5 years
When this section applies
(1)
This section applies when a deposit is in a person’s main income equalisation account at the end of 5 years after the end of the accounting year for which the deposit was made.
Refund
(2)
The Commissioner must refund the deposit to the person. Section EH 28 overrides this subsection.
Defined in this Act: accounting year, Commissioner, deposit, main income equalisation account, person, year
Compare: 2004 No 35 s EH 10
EH 11 Income when refund given at end of 5 years
A refund under section EH 10 is income, under section CB 27 (Income equalisation schemes), derived by the person and is allocated to the income year in which the refund is given.
Defined in this Act: income, income year, person
Compare: 2004 No 35 s EH 11
Refunds: on application
EH 12 Application for refund by person, trustee of estate, Official Assignee, or liquidator
Who may apply
(1)
The following may apply to the Commissioner for a refund of some or all of the amount in a person’s main income equalisation account:
(a)
the person may apply under section EH 13, EH 15, or EH 17:
(b)
the trustee of the person’s estate may apply under section EH 19:
(c)
the Official Assignee having charge of the person’s estate may apply under section EH 23:
(d)
the liquidator appointed for the person may apply under section EH 25.
Application
(2)
An application for a refund must—
(a)
[Repealed](b)
state the grounds on which it is made; and
(c)
state the amount applied for.
Defined in this Act: amount, apply, Commissioner, liquidation, main income equalisation account, person, trustee
Compare: 2004 No 35 s EH 12
Section EH 12(2)(a): repealed, on 2 June 2016, by section 17(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EH 12 list of defined terms apply: inserted, on 2 June 2016, by section 17(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 13 Refund on application
When this section applies
(1)
Refund
(2)
The Commissioner must refund to the person the amount applied for, to the extent to which it can be made up of 1 or more deposits that have been in the person’s main income equalisation account for at least 1 year before the date the deposit ends. Section EH 28 overrides this subsection.
Defined in this Act: amount, apply, Commissioner, date the deposit ends, deposit, main income equalisation account, person, year
Compare: 2004 No 35 s EH 13
Section EH 13 heading: amended, on 2 June 2016, by section 18(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EH 13(1): amended, on 30 March 2021, by section 38 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EH 13 list of defined terms apply: inserted, on 2 June 2016, by section 18(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 14 Income when refund given on application
Year of income
(1)
A refund under section EH 13 is income, under section CB 27 (Income equalisation schemes), derived by the person and is allocated to the income year in which the Commissioner receives the application for the refund.
When year of income may be different
(2)
However, subsection (3) applies instead of subsection (1) if—
(a)
the Commissioner receives the application for a refund in the specified period for an accounting year or, if the Commissioner allows in a case or class of cases, within a longer period; and
(b)
the person chooses in the application that the refund is to be income in the accounting year to which the specified period or the longer period relates.
Different year of income
(3)
The refund is income, under section CB 27, and is allocated to the income year to which the specified period or the longer period relates.
Defined in this Act: accounting year, apply, Commissioner, income, income year, person, specified period
Compare: 2004 No 35 s EH 14
Section EH 14 heading: amended, on 2 June 2016, by section 19(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EH 14 list of defined terms apply: inserted, on 2 June 2016, by section 19(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 15 Refund for development or recovery
Refund for development: application of subsection (2)
(1)
Subsection (2) applies when a person wants a refund of some or all of the amount in their main income equalisation account for either or both of the following purposes:
(a)
to enable them to undertake, immediately after the refund is given, planned development or maintenance work for their farming or agricultural business, fishing business, or forestry operation:
(b)
to enable them to buy, immediately after the refund is given, livestock for use in their farming business, other than livestock replacing livestock disposed of or lost as a result of a self-assessed adverse event.
Refund
(2)
If the Commissioner is satisfied that the person will use the refund for either or both of the purposes, the Commissioner must refund to them the amount applied for, to the extent to which it can be made up of 1 or more deposits that have been in their main income equalisation account for at least 6 months before the date the deposit ends. Section EH 28 overrides this subsection.
Refund for recovery: application of subsection (4)
(3)
Subsection (4) applies when a person wants a refund of some or all of the amount in their main income equalisation account for 1 or more of the following purposes:
(a)
to enable them to buy, immediately after the refund is given, livestock for use in their farming business to replace livestock disposed of or lost as a result of a self-assessed adverse event:
(b)
to avoid them suffering serious hardship:
(c)
to do anything else that the Commissioner determines, in a case or class of cases, is a purpose for which a refund should be given.
Refund
(4)
If the Commissioner is satisfied that the person will use the refund for 1 or more of the purposes, the Commissioner must refund to them the amount applied for, regardless of the length of time it has been in the account. Section EH 28 overrides this subsection.
Defined in this Act: amount, apply, business, Commissioner, date the deposit ends, deposit, fishing business, main income equalisation account, person, self-assessed adverse event
Compare: 2004 No 35 s EH 15
Section EH 15 list of defined terms apply: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 16 Income when refund given for development or recovery
Year of income
(1)
A refund under section EH 15 is income, under section CB 27 (Income equalisation schemes), derived by the person in the income year in which the Commissioner receives the application for the refund.
When year of income may be different
(2)
However, subsection (3) applies instead of subsection (1) if—
(a)
the Commissioner receives the application for a refund in the specified period for an accounting year or, if the Commissioner allows in a case or class of cases, within a longer period; and
(b)
the person chooses in the application that the refund is to be income in the accounting year to which the specified period or the longer period relates.
Different year of income
(3)
The refund is income, under section CB 27, and is allocated to the income year to which the specified period or the longer period relates.
Defined in this Act: accounting year, apply, Commissioner, income, income year, person, specified period
Compare: 2004 No 35 s EH 16
Section EH 16 list of defined terms apply: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 17 Refund on retirement
When this section applies
(1)
This section applies when a farmer or a fisher—
(a)
has a main income equalisation account; and
(b)
is neither a company nor a trustee; and
(c)
retires from the farming or agricultural business or the fishing business.
Refund
(2)
The Commissioner must refund to the person the amount that, on the date the deposit ends, is in their main income equalisation account, regardless of the length of time it has been in the account. Section EH 28 overrides this subsection.
Defined in this Act: amount, business, Commissioner, company, date the deposit ends, farmer, fisher, fishing business, main income equalisation account, person, trustee
Compare: 2004 No 35 s EH 17
EH 18 Income when refund given on retirement, and election to allocate amount to earlier year
Year of income
(1)
A refund under section EH 17 is income, under section CB 27 (Income equalisation schemes), derived by the person in the income year in which they retire.
When year of income may be different
(2)
However, subsection (3) applies instead of subsection (1) if—
(a)
the refund includes a deposit made for an accounting year earlier than the tax year in which the person retires; and
(b)
the person chooses to allocate some or all of the deposit to the earlier accounting year.
Different year of income
(3)
The amount allocated by the person to the earlier accounting year is income, under section CB 27, derived by them in the corresponding income year.
How election made
(4)
A person makes an election under this section by giving the Commissioner notice within 1 of the following times:
(a)
the time within which the person is required to file a return of income for the tax year corresponding to the accounting year in which they retire:
(b)
a further time allowed by the Commissioner in a case or class of cases.
Defined in this Act: accounting year, amount, Commissioner, corresponding income year, deposit, income, income year, notice, person, return of income, tax year
Compare: 2004 No 35 s EH 18
EH 19 Refund on death
When this section applies
(1)
This section applies when a person—
(a)
has a main income equalisation account; and
(b)
dies.
Refund
(2)
Despite section FC 2 (Transfer at market value), the Commissioner must refund to the trustee of the person’s estate the amount that, on the date the deposit ends, is in the person’s main income equalisation account, regardless of the length of time it has been in the account. Section EH 28 overrides this subsection.
Defined in this Act: amount, Commissioner, date the deposit ends, main income equalisation account, person, trustee
Compare: 2004 No 35 s EH 19
EH 20 Income when refund given on death
Year of income
(1)
A refund under section EH 19 is income, under section CB 27 (Income equalisation schemes), derived by the person immediately before their death.
When year of income may be different
(2)
However, section EH 21 or EH 22 applies instead of subsection (1) if the circumstances described in section EH 21(1) or EH 22(1) apply in the person’s case.
Defined in this Act: income, person
Compare: 2004 No 35 s EH 20
EH 21 Income when refund given on death, and election to allocate amount to earlier year
When this section applies
(1)
This section applies when—
(a)
a refund under section EH 19 includes a deposit made for an accounting year earlier than the accounting year in which the person dies; and
(b)
the trustee of the person’s estate chooses to allocate some or all of the deposit to the earlier accounting year.
Different year of income
(2)
The amount allocated by the trustee to the earlier accounting year is income, under section CB 27 (Income equalisation schemes), derived by the person in the corresponding income year.
How election made
(3)
A trustee makes an election under this section by giving the Commissioner notice within 1 of the following times:
(a)
the time within which the trustee is required to file a return of the person’s income for the period to the date of the person’s death:
(b)
a further time allowed by the Commissioner in a case or class of cases.
Defined in this Act: accounting year, amount, Commissioner, corresponding income year, deposit, income, notice, person, return of income, trustee
Compare: 2004 No 35 s EH 21
EH 22 Income when refund given on death, and election to allocate amount to later year or years
When this section applies
(1)
This section applies when—
(a)
the trustee of the person’s estate does not make an election under section EH 21; and
(b)
the trustee chooses to allocate some or all of the amount that is in the person’s main income equalisation account on the date of the person’s death to an accounting year or years after that date.
Accounting year or years referred to in subsection (1)(b)
(2)
The accounting year or years referred to in subsection (1)(b) must be within the earlier of—
(a)
the 3 years after the date of the person’s death; and
(b)
the 5 years after the end of the accounting year for which a deposit or a part of a deposit was made, if the amount that the trustee allocates to a later accounting year or years includes the deposit or part of it.
Allocated amount remains in account
(3)
An amount allocated by the trustee to a later accounting year remains in the person’s main income equalisation account until—
(a)
it is refunded to the trustee in the accounting year to which it is allocated; or
(b)
it is not refunded because of the application of section EH 28.
Different year of income
(4)
An amount allocated by the trustee to a later accounting year is income, under section CB 27 (Income equalisation schemes), derived by the person in the corresponding accounting year.
How election made
(5)
A trustee makes an election under this section by a notice that—
(a)
specifies—
(i)
each amount allocated to a later accounting year; and
(ii)
the accounting year to which each amount is allocated; and
(b)
is given to the Commissioner within 1 of the following times:
(i)
the time within which the trustee is required to file a return of the person’s income for the period to the date of the person’s death:
(ii)
a further time allowed by the Commissioner in a case or class of cases.
Defined in this Act: accounting year, amount, Commissioner, corresponding income year, deposit, income, main income equalisation account, notice, person, return of income, trustee, year
Compare: 2004 No 35 s EH 22
EH 23 Refund on bankruptcy
When this section applies
(1)
This section applies when a person—
(a)
has a main income equalisation account; and
(b)
is bankrupt.
Refund
(2)
The Commissioner must refund to the Official Assignee having charge of the person’s estate the amount that, on the date the deposit ends, is in the person’s main income equalisation account, regardless of the length of time it has been in the account. Section EH 28 overrides this subsection.
Defined in this Act: amount, Commissioner, date the deposit ends, main income equalisation account, person
Compare: 2004 No 35 s EH 23
EH 24 Income when refund given on bankruptcy
A refund under section EH 23 is income, under section CB 27 (Income equalisation schemes), derived by the person immediately before the bankruptcy starts.
Defined in this Act: income, person
Compare: 2004 No 35 s EH 24
EH 25 Refund on liquidation
When this section applies
(1)
This section applies when a person—
(a)
has a main income equalisation account; and
(b)
is put into liquidation.
Refund
(2)
The Commissioner must refund to the liquidator appointed for the person the amount that, on the date the deposit ends, is in the person’s main income equalisation account, regardless of the length of time it has been in the account. Section EH 28 overrides this subsection.
Defined in this Act: amount, Commissioner, date the deposit ends, liquidation, main income equalisation account, person
Compare: 2004 No 35 s EH 25
EH 26 Income when refund given on liquidation
A refund under section EH 25 is income, under section CB 27 (Income equalisation schemes), derived by the person immediately before the liquidation starts.
Defined in this Act: income, liquidation, person
Compare: 2004 No 35 s EH 26
Refunds: general provisions
EH 27 Amendment of assessment
Despite the time bar, the Commissioner may amend an assessment at any time in order to give effect to section EH 18 or EH 21 or EH 22.
Defined in this Act: assessment, Commissioner, time bar
Compare: 2004 No 35 s EH 27
EH 28 Minimum refund
Defined in this Act: Commissioner, date the deposit ends, main income equalisation account, person
Compare: 2004 No 35 s EH 28
EH 29 Deposits from which refunds come
Each refund a person is given is treated as coming from the total amount of their deposits in the order in which the person made the deposits.
Defined in this Act: amount, deposit, person
Compare: 2004 No 35 s EH 29
Tax credit
EH 30 When person entitled to tax credit
A person who is given a refund is entitled to a tax credit if—
(a)
the refund is of the kind and amount described in section EH 31; and
(b)
the person is of the kind described in section EH 32.
Defined in this Act: amount, person
Compare: 2004 No 35 s EH 30
EH 31 Kind and amount of refund that entitles person to tax credit
Kind
(1)
A refund that entitles a person to a tax credit is 1 to which both the following apply:
(a)
(b)
the refund does not come from a deposit made for the accounting year in which the refund is given; if the refund comes in part from a deposit made for the accounting year in which the refund is given and in part from a deposit made for some other accounting year, the refund that entitles the person to a tax credit is the part coming from the deposit for some other accounting year.
Amount
(2)
Once a refund qualifies under subsection (1) as a refund that entitles a person to a tax credit, the amount of the refund is the lesser of the following:
(a)
(b)
the total of the amounts by which the person’s income was reduced in 1 or more earlier accounting years by subtracting the deposit or deposits or parts of deposits from which the refund comes.
Defined in this Act: accounting year, amount, deposit, income, income tax, person, tax credit
Compare: 2004 No 35 s EH 31
EH 32 Kind of person entitled to tax credit
A person in the following circumstances is entitled to a tax credit:
(a)
the person’s income in the accounting year in question includes a refund of the kind described in section EH 31(1) and of the amount described in section EH 31(2); and
(b)
because of the refund, the person’s income tax liability for the tax year corresponding to the accounting year is increased; and
(c)
the amount by which the person’s income tax liability for the corresponding tax year is increased because of the refund (the extra tax) is more than the total of the amounts by which the person’s income tax liability for an earlier tax year or years was decreased because of the subtraction of the deposit or deposits or parts of deposits from which the refund comes (the tax saving).
Defined in this Act: accounting year, amount, deposit, income, income tax, income tax liability, person, tax credit, tax year
Compare: 2004 No 35 s EH 32
EH 33 Amount of tax credit
The amount of a tax credit to which a person is entitled under section EH 30 is the amount by which the extra tax, as described in section EH 32(c), is more than the tax saving, as described in section EH 32(c).
Defined in this Act: amount, income tax, tax credit
Compare: 2004 No 35 s EH 33
Definitions
EH 34 Meaning of income from forestry
Income
(1)
Income from forestry—
(a)
means income derived from either or both of the disposals described in subsection (2) in the circumstances described in subsection (3):
(b)
includes permanent forestry income.
Disposals
(2)
The disposals are—
(a)
the disposal of timber:
(b)
the disposal of a right to cut or remove timber.
Circumstances
(3)
The circumstances are—
(a)
the income is derived by a person who is the owner of land in New Zealand on which timber is grown, not including a person whose interest in the land is that of a licensee; and
(b)
the timber the subject of the disposal is standing or cut or fallen timber in its natural state grown on the land.
Defined in this Act: income, income from forestry, New Zealand, own, permanent forestry income, person, timber
Compare: 2004 No 35 s EH 34
Section EH 34(1): substituted (with effect on 1 April 2008), on 7 December 2009, by section 18(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Section EH 34(1)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EH 34(1)(b): replaced, on 23 June 2020, by section 279 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).
Section EH 34(2) heading: replaced (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EH 34(2): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EH 34(2)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EH 34(2)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EH 34(3)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EH 34 list of defined terms permanent forestry income: inserted, on 23 June 2020, by section 279 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).
Section EH 34 list of defined terms PFSI forestry income: repealed, on 23 June 2020, by section 279 of the Climate Change Response (Emissions Trading Reform) Amendment Act 2020 (2020 No 22).
EH 35 Meaning of main maximum deposit
Meaning
(1)
Main maximum deposit means the maximum deposit that this section says a person may make to their main income equalisation account for an accounting year.
Meaning of amount
(2)
In subsections (3) to (5), amount means an amount calculated without applying—
(a)
any provision, other than section EZ 4B (Cattle destroyed because of Mycoplasma bovis: spreading), allocating income derived or expenditure incurred to an income year other than the corresponding income year in which the income was in fact derived or the expenditure was in fact incurred; or
(b)
any provision of any of the income equalisation schemes referred to in section EH 1(2).
Maximum deposit of farmer
(3)
The maximum deposit that a farmer may make is—
(a)
the amount determined by an Order in Council made under subsection (6); or
(b)
if no order is in force, an amount equal to the net income that the farmer would have in the tax year corresponding to the accounting year if—
(i)
the farmer derived income only from the farming or agricultural business in the accounting year; and
(ii)
[Repealed]Maximum deposit of fisher
(4)
The maximum deposit that a fisher may make is an amount equal to the net income that the fisher would have in the tax year corresponding to the accounting year if the fisher derived income only from the fishing business in the accounting year.
Maximum deposit of forester
(5)
The maximum deposit that a forester may make is an amount equal to the net income that the forester would have in the tax year corresponding to the accounting year if the forester derived only income from forestry in the accounting year.
Order in Council relating to farmers
(6)
The Governor-General may make an Order in Council declaring that the maximum deposit a farmer may make for an accounting year or for every accounting year is—
(a)
an amount calculated in the manner specified in the order; or
(b)
an unlimited amount.
Secondary legislation
(7)
An Order in Council under subsection (6) is secondary legislation (see Part 3 of the Legislation Act 2019 for publication requirements).
Defined in this Act: accounting year, amount, business, corresponding income year, deposit, farmer, fisher, fishing business, forester, income, main income equalisation account, main maximum deposit, net income, income year, pay, person, tax year
Compare: 2004 No 35 s EH 35
| Legislation Act 2019 requirements for secondary legislation made under this section | ||||
| Publication | PCO must publish it on the legislation website and notify it in the Gazette | LA19 s 69(1)(c) | ||
| Presentation | The Minister must present it to the House of Representatives | LA19 s 114, Sch 1 cl 32(1)(a) | ||
| Disallowance | It may be disallowed by the House of Representatives | LA19 ss 115, 116 | ||
| This note is not part of the Act. | ||||
Section EH 35(2)(a): amended (with effect on 1 April 2017), on 30 March 2021, by section 39(1) (and see section 39(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EH 35(3)(b)(ii): repealed, on 18 March 2019, by section 168(1) (and see section 168(2) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EH 35(7) heading: inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
Section EH 35(7): inserted, on 28 October 2021, by section 3 of the Secondary Legislation Act 2021 (2021 No 7).
EH 36 Other definitions
In the main income equalisation scheme,—
date the deposit ends means—
(a)
the date on which the refund is calculated, when section EH 8 applies:
(b)
the date that is 5 years after the end of the accounting year for which the deposit was made, when section EH 10 applies:
(c)
the date on which the Commissioner receives the application for the refund, when section EH 13 or EH 15 applies:
(d)
the date of the person’s retirement, when section EH 17 applies:
(e)
the date of the person’s death, when section EH 19 applies:
(f)
the date on which the Commissioner receives notice of the adjudication, when section EH 23 applies:
(g)
the date on which the Commissioner receives notice of the liquidation, when section EH 25 applies
deposit—
(a)
means a main deposit; and
(b)
includes, for the purposes of sections EH 6(2) to (4), EH 10 to EH 33, and EZ 80(3) and (7)(b), interest that is added to a main deposit under section EH 6(5)
fishing business includes a business of—
(a)
fish farming under a licence issued under the Freshwater Fish Farming Regulations 1983:
(b)
mussel farming:
(c)
rock oyster farming
main deposit means a payment made to the Commissioner under section EH 4(1)
main income equalisation account, for a person, means the account that the Commissioner keeps in the person’s name under section EH 5
specified period, for a person’s tax year, means the shorter of—
(a)
the period of 6 months after the end of the accounting year that corresponds to the tax year; and
(b)
the period from the end of the accounting year that corresponds to the tax year to the date 1 month after the date by which the person must, under section 37 of the Tax Administration Act 1994, file their return of income for the accounting year that corresponds to the tax year.
Defined in this Act: accounting year, apply, business, Commissioner, date the deposit ends, deposit, fishing business, interest, liquidation, main deposit, main income equalisation account, main income equalisation scheme, pay, person, return of income, specified period, tax year, year
Compare: 2004 No 35 s EH 37
Section EH 36 deposit paragraph (b): amended, on 30 March 2021, by section 40 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EH 36 list of defined terms apply: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Adverse event income equalisation scheme[Repealed]
Heading: repealed, on 18 March 2019, by section 169(1) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Application[Repealed]
Heading: repealed, on 18 March 2019, by section 169(1) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 37 Persons to whom adverse event income equalisation scheme applies
[Repealed]Section EH 37: repealed, on 18 March 2019, by section 169(2) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Deposits and accounts[Repealed]
Heading: repealed, on 18 March 2019, by section 169(2) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 38 Adverse event deposit
[Repealed]Section EH 38: repealed, on 18 March 2019, by section 169(3) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 39 Adverse event income equalisation account
[Repealed]Section EH 39: repealed, on 18 March 2019, by section 169(3) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Interest[Repealed]
Heading: repealed, on 18 March 2019, by section 169(3) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 40 Interest on deposits in adverse event income equalisation account
[Repealed]EH 40: repealed, on 18 March 2019, by section 169(4) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Deduction[Repealed]
Heading: repealed, on 18 March 2019, by section 169(4) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 41 Deduction of deposit
[Repealed]Section EH 41: repealed, on 18 March 2019, by section 169(5) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Refunds: automatic[Repealed]
Heading: repealed, on 18 March 2019, by section 169(5) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 42 Refund of excess deposit
[Repealed]Section EH 42: repealed, on 18 March 2019, by section 169(6) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 43 Income does not include excess deposit
[Repealed]Section EH 43: repealed, on 18 March 2019, by section 169(6) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Refunds: on application[Repealed]
Heading: repealed, on 18 March 2019, by section 169(6) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 44 Application for refund by person, trustee of estate, Official Assignee, or liquidator
[Repealed]Section EH 44: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 45 Refund on application
[Repealed]Section EH 45: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 46 Income when refund given on application
[Repealed]Section EH 46: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 47 Refund on retirement
[Repealed]Section EH 47: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 48 Income when refund given on retirement, and election to allocate amount to earlier year
[Repealed]Section EH 48: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 49 Refund on death
[Repealed]Section EH 49: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 50 Income when refund given on death
[Repealed]Section EH 50: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 51 Income when refund given on death, and election to allocate amount to earlier year
[Repealed]Section EH 51: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 52 Income when refund given on death, and election to allocate amount to later year or years
[Repealed]Section EH 52: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 53 Refund on bankruptcy
[Repealed]Section EH 53: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 54 Income when refund given on bankruptcy
[Repealed]Section EH 54: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 55 Refund on liquidation
[Repealed]Section EH 55: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 56 Income when refund given on liquidation
[Repealed]Section EH 56: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Refunds: general provisions[Repealed]
Heading: repealed, on 18 March 2019, by section 169(7) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 57 Amendment of assessment
[Repealed]Section EH 57: repealed, on 18 March 2019, by section 169(8) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 58 Minimum refund
[Repealed]Section EH 58: repealed, on 18 March 2019, by section 169(8) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 59 Deposits from which refunds come
[Repealed]Section EH 59: repealed, on 18 March 2019, by section 169(8) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Transfers[Repealed]
Heading: repealed, on 18 March 2019, by section 169(8) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 60 Transfer of deposit
[Repealed]Section EH 60: repealed, on 18 March 2019, by section 169(9) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Definitions[Repealed]
Heading: repealed, on 18 March 2019, by section 169(9) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
EH 61 Meaning of adverse event maximum deposit
[Repealed]Section EH 61: repealed, on 18 March 2019, by section 169(10) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Section EH 61(3): amended (with effect on 1 April 2017), on 30 March 2021, by section 41 (and see section 41(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
EH 62 Other definitions
[Repealed]Section EH 62: repealed, on 18 March 2019, by section 169(10) (and see section 169(11) for application) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
Thinning operations income equalisation scheme
Application
EH 63 Persons to whom thinning operations income equalisation scheme applies
Person described
(1)
The thinning operations income equalisation scheme applies to a company that, in an accounting year,—
(a)
carries on a forestry business on land in New Zealand; and
(b)
derives income from carrying out thinning operations on the land.
Meaning of person for thinning operations income equalisation scheme
(2)
In the thinning operations income equalisation scheme, person means a person described in subsection (1).
Defined in this Act: accounting year, business, company, forestry business, income, New Zealand, person, thinning operations, thinning operations income equalisation scheme
Compare: 2004 No 35 s EH 65
Section EH 63 list of defined terms forestry business: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
Deposits and accounts
EH 64 Thinning operations deposit
Deposit for thinning operations
(1)
A person may make a payment to the Commissioner for entry in their thinning operations income equalisation account for an accounting year in which they derive income from carrying out thinning operations.
Upper limit of deposit
(2)
A person must not make, for an accounting year, deposits that in total are more than their thinning operations maximum deposit for the accounting year.
Lower limit of deposit
(3)
A person must not make, for an accounting year, a deposit that is less than the lesser of—
(a)
$200; and
(b)
the difference between the total of all the deposits the person has previously made for the accounting year and their thinning operations maximum deposit for the accounting year.
Time of making deposit
(4)
A person makes a deposit for an accounting year by—
(a)
making the deposit during the accounting year; or
(b)
doing both the following:
(i)
making the deposit during the specified period for the accounting year; and
(ii)
at the time of making it, giving the Commissioner notice that the deposit is for the accounting year; or
(c)
doing both the following:
(i)
making the deposit within a time that is after the end of the specified period for the accounting year but that is allowed by the Commissioner in a case or class of cases; and
(ii)
at the time of making it, giving the Commissioner notice that the deposit is for the accounting year.
Limit on making deposit
(5)
If a refund has been made to a person for an accounting year under section EH 71 or EH 73, the person may later make a deposit for the accounting year only if the Commissioner is satisfied, before the deposit is made, that all the refund has been used to expand or develop the person’s business.
Defined in this Act: accounting year, business, Commissioner, deposit, income, notice, pay, person, specified period, thinning operations, thinning operations deposit, thinning operations income equalisation account, thinning operations maximum deposit
Compare: 2004 No 35 s EH 66
EH 65 Thinning operations income equalisation account
Person’s account
(1)
The Commissioner must keep a thinning operations income equalisation account in the name of every person that makes a deposit with the Commissioner.
Deposits in accounts
(2)
Every deposit a person makes with the Commissioner must be entered in their thinning operations income equalisation account.
Amounts in accounts
(3)
The only amounts that may be entered in a person’s thinning operations income equalisation account are—
(a)
deposits made by the person with the Commissioner; and
(b)
interest paid under section EH 66.
Amounts not available to others
(4)
Despite section FC 2 (Transfer at market value), amounts entered in a person’s thinning operations income equalisation account must not, while they are in the account,—
(a)
be assigned or charged in any way; or
(b)
pass by operation of law to, or into the custody or control of, someone else, except when the person has been put into liquidation; or
(c)
be assets for the payment of the person’s debts or liabilities, except when the person has been put into liquidation.
Amounts available only for refunds
Defined in this Act: amount, Commissioner, deposit, interest, liquidation, pay, person, thinning operations income equalisation account
Compare: 2004 No 35 s EH 67
Interest
EH 66 Interest on deposits in thinning operations income equalisation account
No interest payable
(1)
No interest is payable on a deposit in a thinning operations income equalisation account that is refunded within 1 year of the date of deposit.
Interest payable
(2)
Interest is payable on every other deposit in a thinning operations income equalisation account.
Period
(3)
Interest is computed with daily rests from the date of acknowledgment of the receipt of the deposit until the date the deposit is refunded.
Date to which interest accrues
(4)
Interest on a deposit accrues until the earlier of—
(a)
31 March in each year; and
(b)
the date the deposit is refunded.
Added to deposit
(5)
Accrued interest on a deposit is added to the deposit.
Rate
(6)
The interest rate is 3% a year.
Defined in this Act: deposit, interest, pay, thinning operations income equalisation account, year
Compare: 2004 No 35 s EH 68
Deductions
EH 67 Deduction of deposit
When this section applies
(1)
This section applies when a person is allowed a deduction under section DQ 3 (Thinning operations income equalisation scheme).
Amount of deduction
(2)
The amount of the deduction is the lesser of—
(a)
the total of the person’s deposits for the accounting year; and
(b)
their thinning operations maximum deposit for the accounting year.
Timing of deduction
(3)
The person is allowed the deduction in the accounting year.
Defined in this Act: accounting year, amount, deduction, deposit, person, thinning operations maximum deposit
Compare: 2004 No 35 s EH 69
Refunds: automatic
EH 68 Refund of excess deposit
When this section applies
(1)
This section applies when a person’s deposits for an accounting year are more than their thinning operations maximum deposit for the accounting year.
Refund
(2)
The Commissioner must refund the excess to the person as soon as practicable after the date the deposit ends.
Defined in this Act: accounting year, Commissioner, date the deposit ends, deposit, person, thinning operations maximum deposit
Compare: 2004 No 35 s EH 70
EH 69 Income does not include excess deposit
A refund under section EH 68 is excluded income under section CX 51 (Income equalisation schemes).
Defined in this Act: excluded income
Compare: 2004 No 35 s EH 71
Refunds: on application
EH 70 Application for refund by person or liquidator
Who may apply
(1)
The following may apply to the Commissioner for a refund of some or all of the amount in a person’s thinning operations income equalisation account:
(a)
the person may apply under section EH 71 or EH 73:
(b)
the liquidator appointed for the person may apply under section EH 75.
Application
(2)
An application for a refund must—
(a)
[Repealed](b)
state the grounds on which it is made; and
(c)
state the amount applied for.
Defined in this Act: amount, apply, Commissioner, liquidation, person, thinning operations income equalisation account
Compare: 2004 No 35 s EH 72
Section EH 70(2)(a): repealed, on 2 June 2016, by section 23(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EH 70 list of defined terms apply: inserted, on 2 June 2016, by section 23(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 71 Refund on application
When this section applies
(1)
This section applies when a person wants a refund of some or all of the amount in the person’s thinning operations income equalisation account, and neither section EH 73 nor EH 75 applies.
Refund
(2)
The Commissioner must refund to the person the amount applied for, to the extent to which it can be made up of 1 or more deposits that have been in the person’s thinning operations income equalisation account for at least 1 year before the date the deposit ends.
Defined in this Act: amount, apply, Commissioner, date the deposit ends, deposit, person, thinning operations income equalisation account, year
Compare: 2004 No 35 s EH 73
Section EH 71 heading: amended, on 2 June 2016, by section 24(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EH 71 list of defined terms apply: inserted, on 2 June 2016, by section 24(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 72 Income when refund given on application
Year of income
(1)
A refund under section EH 71 is income, under section CB 27 (Income equalisation schemes), derived by the person in the income year in which the Commissioner receives the application for the refund.
When year of income may be different
(2)
However, subsection (3) applies instead of subsection (1) if—
(a)
the Commissioner receives the application for a refund in the specified period for an accounting year or, if the Commissioner allows in a case or class of cases, within a longer period; and
(b)
the person chooses in the application that the refund is to be income in the accounting year to which the specified period or the longer period relates.
Different year of income
(3)
The refund is income under section CB 27 in the corresponding income year to which the specified period or the longer period relates.
Defined in this Act: accounting year, apply, Commissioner, corresponding income year, income, income year, person, specified period
Compare: 2004 No 35 s EH 74
Section EH 72 heading: amended, on 2 June 2016, by section 25(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EH 72 list of defined terms apply: inserted, on 2 June 2016, by section 25(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 73 Refund for development or recovery
Refund for development: application of subsection (2)
(1)
Subsection (2) applies when a person wants a refund of some or all of the amount in their thinning operations income equalisation account for the purpose of enabling them to undertake, immediately after the refund is given, planned development or maintenance work for their forestry business.
Refund
(2)
If the Commissioner is satisfied that the person will use the refund for the purpose, the Commissioner must refund to them the amount applied for, to the extent to which it can be made up of 1 or more deposits that have been in the person’s thinning operations income equalisation account for at least 6 months before the date the deposit ends.
Refund for recovery: application of subsection (4)
(3)
Subsection (4) applies when a person wants a refund of some or all of the amount in their thinning operations income equalisation account for either or both of the following purposes:
(a)
to avoid them suffering serious hardship:
(b)
to do anything else that the Commissioner determines, in a case or class of cases, is a purpose for which a refund should be given.
Refund
(4)
If the Commissioner is satisfied that the person will use the refund for either or both of the purposes, the Commissioner must refund to them the amount applied for, regardless of the length of time it has been in the account.
Defined in this Act: amount, apply, business, Commissioner, date the deposit ends, deposit, forestry business, person, thinning operations income equalisation account
Compare: 2004 No 35 s EH 75
Section EH 73 list of defined terms apply: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EH 73 list of defined terms forestry business: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
EH 74 Income when refund given for development or recovery
Year of income
(1)
A refund under section EH 73 is income, under section CB 27 (Income equalisation schemes), derived by the person in the income year in which the Commissioner receives the application for the refund.
When year of income may be different
(2)
However, subsection (3) applies instead of subsection (1) if—
(a)
the Commissioner receives the application for a refund in the specified period for an accounting year or, if the Commissioner allows in a case or class of cases, within a longer period; and
(b)
the person chooses in the application that the refund is to be income in the accounting year to which the specified period or the longer period relates.
Different year of income
(3)
The refund is income under section CB 27 derived in the corresponding income year to which the specified period or the longer period relates.
Defined in this Act: accounting year, apply, Commissioner, corresponding income year, income, income year, person, specified period
Compare: 2004 No 35 s EH 76
Section EH 74 list of defined terms apply: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EH 75 Refund on liquidation
When this section applies
(1)
This section applies when a person—
(a)
has a thinning operations income equalisation account; and
(b)
is put into liquidation.
Refund
(2)
The Commissioner must refund to the liquidator appointed for the person the amount that, on the date the deposit ends, is in the person’s thinning operations income equalisation account on the date, regardless of the length of time it has been in the account.
Defined in this Act: amount, Commissioner, date the deposit ends, liquidation, person, thinning operations income equalisation account
Compare: 2004 No 35 s EH 77
EH 76 Income when refund given on liquidation
A refund under section EH 75 is income, under section CB 27 (Income equalisation schemes), derived by the person immediately before the liquidation starts.
Defined in this Act: income, liquidation, person
Compare: 2004 No 35 s EH 78
Refunds: general provisions, and tax credits
EH 77 Sections of main income equalisation scheme that apply to thinning operations income equalisation scheme
Sections EH 28 to EH 33 apply, with the necessary amendments, to the thinning operations income equalisation scheme.
Defined in this Act: main income equalisation scheme, thinning operations income equalisation scheme
Compare: 2004 No 35 s EH 79
Definitions
EH 78 Meaning of thinning operations maximum deposit
Meaning
(1)
Thinning operations maximum deposit means the maximum deposit that this section says a person may make to their thinning operations income equalisation account for a tax year.
Maximum deposit
(2)
The maximum deposit that a person may make is an amount equal to the income derived by them during the accounting year from carrying out thinning operations on the land on which they carry on their forestry business.
Meaning of amount
(3)
In subsection (2), amount means an amount calculated without applying—
(a)
any provision allocating income derived or expenditure incurred to an income year other than the income year in which the income was in fact derived or the expenditure was in fact incurred:
(b)
any provision of any of the income equalisation schemes referred to in section EH 1(2).
Defined in this Act: accounting year, amount, business, deposit, forestry business, income, income year, person, thinning operations, thinning operations income equalisation account, thinning operations maximum deposit
Compare: 2004 No 35 s EH 80
Section EH 78 list of defined terms forestry business: inserted (with effect on 1 April 2008), on 7 December 2009, by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
EH 79 Other definitions
In the thinning operations income equalisation scheme,—
date the deposit ends means—
(a)
the date on which the refund is calculated, when section EH 68 applies:
(b)
the date on which the Commissioner receives the application for the refund, when section EH 71 or EH 73 applies:
(c)
the date on which the Commissioner receives notice of the liquidation, when section EH 75 applies
deposit—
(a)
means a thinning operations deposit; and
(b)
includes, for the purposes of sections EH 66(2) to (4) and EH 70 to EH 77, interest that is added to a thinning operations deposit under section EH 66(5)
specified period, for a person’s tax year, means the shorter of—
(a)
the period of 6 months after the end of the accounting year that corresponds to the tax year; and
(b)
the period from the end of the accounting year that corresponds to the tax year to the date 1 month after the date by which the person must, under section 37 of the Tax Administration Act 1994, file their return of income for the accounting year that corresponds to the tax year
thinning operations means operations in which some trees in an immature stand of trees are felled for the purpose of improving the growth and form of the remaining trees and not for the purpose of permanently breaking the canopy
thinning operations deposit means a payment made to the Commissioner under section EH 64(1)
thinning operations income equalisation account, for a person, means the account that the Commissioner keeps in the person’s name under section EH 65.
Defined in this Act: apply, Commissioner, date the deposit ends, interest, liquidation, pay, person, return of income, specified period, tax year, thinning operations, thinning operations deposit, thinning operations income equalisation account, thinning operations income equalisation scheme
Compare: 2004 No 35 s EH 81
Section EH 79 list of defined terms apply: inserted, on 2 June 2016, by section 74 of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Subpart EI—Spreading of specific income
Contents
Farming and forestry
EI 1 Spreading backward of income from timber
When this section applies
(1)
This section applies when a person derives income under section CB 24 (Disposal of timber or right to take timber) or CB 25 (Disposal of land with standing timber).
Timing of income
(2)
The person may allocate the income between the income year in which they derive it and any 1 or more of the previous 3 income years.
Application
(3)
A person who wants to make an allocation under subsection (2) must apply to the Commissioner no later than 1 year after the end of the income year in which they derive the income.
Defined in this Act: apply, Commissioner, income, income year, timber, year
Compare: 2004 No 35 s EI 1
Section EI 1(3): amended, on 2 June 2016, by section 26(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EI 1 list of defined terms apply: inserted, on 2 June 2016, by section 26(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Inflation-indexed instruments
EI 2 Interest from inflation-indexed instruments
When this section applies
(1)
This section applies when—
(a)
an amount of money lent is outstanding at the end of the lender’s current income year; and
(b)
an amount is payable to the lender for the money lent, in a future income year of the lender; and
(c)
the amount payable is determined by a fixed relationship to 1 or more indices of general price inflation in New Zealand; and
(d)
the amount payable that has accrued at the end of the lender’s current income year differs from any amount payable that had accrued—
(i)
at the time the money was lent, if it was lent during the lender’s current income year; or
(ii)
at the end of the lender’s previous income year, if it was lent before the lender’s current income year.
Increase treated as credited
(2)
If the difference is an increase, the increase is treated as having been credited in account and capitalised by the borrower for the benefit of the lender on—
(a)
the day following the day on which the level of the relevant index at the end of the lender’s current income year becomes public knowledge; or
(b)
if the level of the relevant index is not calculated for the end of the lender’s current income year, the last date before the end of the income year for which the level is calculated.
This subsection is overridden by subsection (3).
Increase not treated as credited
(3)
An increase is not treated as having been credited to the extent to which—
(a)
the money lent has been repaid:
(b)
an amount on account of the increase has already been paid to the lender:
(c)
the increase represents a recovery of a decrease in the amount payable over an earlier income year of the lender.
Defined in this Act: amount, income year, interest, money lent, New Zealand, pay
Compare: 2004 No 35 s EI 2
Intellectual property
EI 3 Assigning or granting copyright
When this section applies
(1)
This section applies when a person—
(a)
is the author of a literary, dramatic, musical, or artistic work; and
(b)
made the work over a period of more than 1 year; and
(c)
receives consideration from—
(i)
assigning some or all of the copyright in the work; or
(ii)
granting an interest in the copyright by licence.
Timing of income: lump sum payment
(2)
If some or all of the consideration is a lump sum payment that would be income in 1 tax year, the person may allocate the income equally between the income year in which they receive it and—
(a)
the income year before that income year, if they made the work over a period of 2 years or less; or
(b)
the 2 income years before that income year, if they made the work over a period of more than 2 years.
Timing of income: other payments
(3)
If some or all of the consideration is not a lump sum payment, would be income in 1 tax year, and is received by the person within 2 years after the first publication of the work, the person may allocate the income equally between the income year in which they receive it and the previous income year.
Self-publication
(4)
Subsection (3) applies to income that the person derives from being the publisher of their work.
Application
(5)
The following provisions apply to an allocation for the purposes of subsections (2) and (3):
(a)
for an allocation under subsection (2), the person must apply to the Commissioner no later than 6 years after the end of the income year in which they receive the payment; and
(b)
for an allocation under subsection (3), the person must apply to the Commissioner no later than 8 years after the first publication of the work.
Some definitions
(6)
In this section,—
author includes a joint author
first publication means the first occasion on which the work or a reproduction of it is published, performed, or exhibited
lump sum payment includes an advance on account of royalties.
Defined in this Act: apply, author, Commissioner, first publication, income, income year, lump sum payment, pay, royalty, tax year, year
Compare: 2004 No 35 s EI 3
Section EI 3(5)(a): amended, on 2 June 2016, by section 27(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EI 3(5)(b): amended, on 2 June 2016, by section 27(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EI 3 list of defined terms apply: inserted, on 2 June 2016, by section 27(3) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
EI 4 Spreading income from patent rights
When this section applies
(1)
This section applies when a person derives income under section CB 30 (Disposal of patent applications or patent rights).
Timing of income
(2)
The person may allocate the income equally between the income year in which they derive it and the following 2 income years.
Defined in this Act: income, income year, patent right
Compare: 2004 No 35 s EI 3B
Section EI 4(1): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Land
EI 4B Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence
When this section applies
(1)
This section applies when a person, in an income year, derives an amount that is income under section CC 1B (Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence), or incurs an amount of expenditure that is allowed as a deduction under section DB 20B (Consideration for agreement to grant, renew, extend, or transfer leasehold estate or licence), and the amount is incurred or derived—
(a)
in relation to a right (the land right) that is a leasehold estate or a licence to use land; and
(b)
in relation to a period (the spreading period)—
(i)
beginning with the commencement, or a renewal or extension, of the land right; and
(ii)
ending before the earliest following date on which the land right may be terminated, or may expire, if not extended or renewed.
Exception for amount of income under section CC 1 or CG 8
(2)
This section does not apply to an amount that is income under section CC 1 or CG 8 (which relate to income from land or capital contributions).
Timing of income and deductions for land right with spreading period
(3)
If the amount is incurred or derived—
(a)
before the end of the spreading period, the amount is allocated in equal portions to each month that—
(i)
includes part of the spreading period; and
(ii)
ends after the amount is incurred or derived; and
(iii)
is included in an income year ending within 50 years from the beginning of the spreading period; and
(b)
at or after the end of the spreading period, the amount is allocated to the income year in which it is incurred or derived.
Effect for income of person ceasing to have estate in land
(4)
If an amount of income would be allocated to a spreading period of a land right under subsection (3) for a person in the absence of this subsection, the amount is allocated to an income year (the balance year) ending before the end of the spreading period, if—
(a)
at the beginning of the balance year, the person holds the land right, or the estate in land from which the land right is granted; and
(b)
in the balance year, the person ceases to hold the land right, or the estate in land from which the land right is granted; and
(c)
the amount would be allocated under subsection (3) to an income year—
(i)
ending before, or including, the end of the spreading period; and
(ii)
after the balance year.
Effect for deduction of person ceasing to have leasehold estate or licence
(5)
If an amount of a deduction would be allocated to a spreading period of a land right under subsection (3) for a person (the affected person) in the absence of this subsection, the amount is allocated to an income year (the balance year) ending before the end of the spreading period, if—
(a)
at the beginning of the balance year, either or both of the land right and the estate in land from which the land right is granted are held by the affected person or a person associated with the affected person; and
(b)
at the end of the balance year, neither of the land right and the estate in land from which the land right is granted are held by the affected person or a person associated with the affected person; and
(c)
the amount would be allocated under subsection (3) to an income year—
(i)
ending before, or including, the end of the spreading period; and
(ii)
after the balance year.
Effect for deduction of early termination of leasehold estate or licence
(5B)
If an amount of a deduction would be allocated to a spreading period of a land right under subsection (3) for a person (the affected person) in the absence of this subsection, the amount is allocated to an income year (the balance year) ending before the end of the spreading period, if—
(a)
the affected person holds the estate in land from which the land right is granted; and
(b)
the land right is surrendered or terminated in the balance year.
Relationship between subsections
(6)
Subsections (4), (5), and (5B) override subsection (3).
Defined in this Act: amount, associated, deduction, estate, income, income year, land, leasehold estate, own
Section EI 4B: inserted (with effect on 1 April 2013 and applying to an amount that is incurred or derived on or after that date in relation to a lease or licence entered, renewed, extended, or transferred on or after that date), on 17 July 2013, by section 48(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
Section EI 4B(5B) heading: inserted (with effect on 1 April 2013 and applying to an amount that is incurred or derived on or after that date in relation to a lease or licence entered, renewed, extended, or transferred on or after that date), on 30 June 2014, by section 70(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 4B(5B): inserted (with effect on 1 April 2013 and applying to an amount that is incurred or derived on or after that date in relation to a lease or licence entered, renewed, extended, or transferred on or after that date), on 30 June 2014, by section 70(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 4B(6): replaced (with effect on 1 April 2013 and applying to an amount that is incurred or derived on or after that date in relation to a lease or licence entered, renewed, extended, or transferred on or after that date), on 30 June 2014, by section 70(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
EI 5 Amount paid to lessor for non-compliance with covenant for repair
When this section applies
(1)
This section applies when a lessor receives an amount of income under section CC 2 (Non-compliance with covenant for repair).
Timing of income: if election made
(2)
The lessor may choose to allocate the income between the income year in which they receive the amount and any 1 or more of the following 4 income years.
Timing of income: if election not made
(3)
Any part of the amount that the lessor does not allocate as described in subsection (2) is allocated to the fourth income year following the income year in which they receive the amount.
Notice
(4)
The following provisions apply to an allocation for the purposes of subsection (2):
(a)
the lessor must give a notice to the Commissioner that specifies how the income has been allocated; and
(b)
the lessor must give the notice within the time required to file a return of income for the income year to which the income is allocated or within a longer time if the Commissioner agrees; and
(c)
the lessor must not revoke the election.
Relationship with sections CC 2 and EI 6
(5)
This section overrides section CC 2(2) and is overridden by section EI 6.
Defined in this Act: amount, Commissioner, income, income year, notice, return of income
Compare: 2004 No 35 s EI 4
EI 6 Amount paid for non-compliance: when lessor ceases to own land
When this section applies
(1)
This section applies when a lessor—
(a)
allocates income under section EI 5 to more than 1 income year; and
(b)
ceases to own the land to which the income relates before the end of the third tax year following the tax year in which they receive the income.
Timing of income
(2)
If the lessor has not allocated a part of the income, the part is allocated to the income year in which the lessor ceases to own the land.
Ownership of part of land ceasing
(3)
If the lessor ceases to own part of the land to which the income relates,—
(a)
this section applies to the part of the land that the lessor ceases to own; and
(b)
section EI 5 applies to the part of the land that the lessor continues to own.
Defined in this Act: amount, income, income year, own, tax year
Compare: 2004 No 35 s EI 5
EI 7 Leases: income derived in anticipation
When this section applies
(1)
This section applies when a person derives, in a tax year, income in anticipation from fines, premiums, a payment of goodwill on the grant of a lease, or in another similar way.
Timing of income
(2)
The person may choose to—
(a)
divide the income into 6 equal portions; and
(b)
allocate a portion to the income year in which they derive the amount; and
(c)
similarly allocate a portion to each of the next 5 income years.
Notice
(3)
The following provisions apply to an allocation for the purposes of subsection (2):
(a)
the person must notify the Commissioner of their election:
(b)
the person must give the notice in the tax year following the tax year to which the income year of derivation corresponds:
(c)
the Commissioner may cancel the allocation at any time.
Cancellation of allocation
(4)
If the Commissioner cancels the allocation, the income allocated to the income year in which the cancellation occurs and to future income years is allocated to the income year before the income year in which the cancellation occurs.
Transitional provision: 2015–16 and later income years
(5)
Despite subsection (2), when a person has derived an amount of income to which this section applies before the 2015–16 income year, and all or part of that amount remains unallocated at the start of that income year, the person must—
(a)
if the period of 5 income years after the income year of derivation has expired by the start of the 2015–16 income year, allocate the remaining amount to the 2015–16 income year; or
(b)
if the period of 5 income years after the income year of derivation has not expired before the start of the 2015–16 income year, divide the remaining amount into equal portions based on the number of income years left in the period, and allocate a portion to each of those income years falling after the end of the 2014–15 income year.
Defined in this Act: amount, Commissioner, income, income year, lease, notice, pay, tax year
Compare: 2004 No 35 s EI 6
Section EI 7(2): replaced, on 1 April 2015 (applying for the 2015–16 and later income years), by section 71(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 7(3)(a): amended, on 1 April 2015 (applying for the 2015–16 and later income years), by section 71(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 7(5) heading: inserted, on 1 April 2015 (applying for the 2015–16 and later income years), by section 71(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 7(5): inserted, on 1 April 2015 (applying for the 2015–16 and later income years), by section 71(3) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 7 list of defined terms amount: inserted, on 1 April 2015 (applying for the 2015–16 and later income years), by section 71(4) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
EI 8 Disposal of land to the Crown
When this section applies
(1)
This section applies when a person derives income from disposing of any of their land to the Crown.
Timing of income
(2)
The person may choose to—
(a)
divide the income into 4 equal portions; and
(b)
allocate a portion to the income year in which they derive the amount; and
(c)
similarly allocate a portion to each of the next 3 income years.
Timing of deduction
(3)
If the person allocates income to 2 or more income years, they must allocate part of any deduction allowed for the cost of the land to the same income years. The part must bear the same proportion to the total deduction as the allocated income bears to the total amount of income.
Application
(4)
The following provisions apply to an allocation for the purposes of subsection (2):
(a)
the person, or another person for them, must apply to the Commissioner:
(b)
the application must be made within 1 year after the end of the tax year in which the person derives the income or within a longer time if the Commissioner agrees:
(c)
the person must arrange to meet all income tax liabilities relating to the income:
(d)
the Commissioner may cancel the allocation at any time.
Cancellation of allocation
(5)
If the Commissioner cancels the allocation,—
(a)
the whole of the income or deduction, as applicable, is allocated to the income year before the income year in which the cancellation occurs:
(b)
the cancellation does not affect income or a deduction that has been allocated to an earlier income year.
Transitional provision: 2015–16 and later income years
(6)
Despite subsection (2), when a person has derived an amount of income to which this section applies before the 2015–16 income year, and all or part of that amount remains unallocated at the start of that income year, the person must—
(a)
if the period of 3 income years after the income year of derivation has expired before the start of the 2015–16 income year, allocate the remaining amount to the 2015–16 income year; or
(b)
if the period of 3 income years after the income year of derivation has not expired before the start of the 2015–16 income year, divide the remaining amount into equal portions based on the number of income years left in the period, and allocate a portion to each of those income years falling after the end of the 2014–15 income year.
Defined in this Act: amount, apply, Commissioner, deduction, income, income tax liability, income year, tax year, year
Compare: 2004 No 35 s EI 7
Section EI 8(2): replaced, on 1 April 2015 (applying for the 2015–16 and later income years), by section 72(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 8(4)(a): replaced, on 2 June 2016, by section 28(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Section EI 8(6) heading: inserted, on 1 April 2015 (applying for the 2015–16 and later income years), by section 72(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 8(6): inserted, on 1 April 2015 (applying for the 2015–16 and later income years), by section 72(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
Section EI 8 list of defined terms apply: inserted, on 2 June 2016, by section 28(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
Shareholder-employees
EI 9 Matching rule for employment income of shareholder-employee
Matching if company allowed deduction
(1)
If a company is allowed a deduction for expenditure on employment income that is paid or is payable to a shareholder-employee under section CE 1 (Amounts derived in connection with employment), the income is allocated in the way set out in subsections (2) and (3).
Allocation to deduction year unless unexpired
(2)
The income is allocated to the income year to which the deduction allowed to the company is allocated, except for an amount equal to any unexpired portion for the income year of the company’s expenditure under section EA 4 (Deferred payment of employment income).
Allocation when no longer treated as unexpired
(3)
The remaining income is allocated to the income year or years in which the corresponding amount of the company’s expenditure on the income is no longer treated as an unexpired portion.
Defined in this Act: amount, company, deduction, employment income, income year, pay, shareholder-employee
Compare: 2004 No 35 s EI 8
Subpart EJ—Spreading of specific expenditure
Contents
Farming and forestry
EJ 1 Spreading backward of deductions for costs of timber
When this section applies
(1)
This section applies when a person derives income under section CB 24 (Disposal of timber or right to take timber) or CB 25 (Disposal of land with standing timber).
Timing of deduction
(2)
The person must allocate every amount allowed as a deduction for a cost of timber to the income years to which the income is allocated under section EI 1 (Spreading backward of income from timber), and in the same proportions as it is allocated.
Defined in this Act: amount, deduction, income, income year
Compare: 2004 No 35 s EJ 1
EJ 2 Spreading forward of deductions for repairs to fishing boats
When this section applies: generally
(1)
This section applies when a person who carries on a fishing business in New Zealand is allowed a deduction for expenditure incurred in making repairs or alterations required by Part 19 or 21 of the Maritime Rules made under the Maritime Transport Act 1994 to the equipment, hull, or machinery of a fishing boat used wholly for the purposes of the business.
When subsection (3) applies
(2)
Subsection (3) applies when the person does not cease to carry on the business before the end of the fourth tax year following the tax year in which the expenditure is incurred.
Business not ceasing within 4 years
(3)
The person may do 1 of the following to the total amount of expenditure allowed as a deduction:
(a)
deduct it in the income year in which the expenditure is incurred; or
(b)
allocate it to any 1 of the 4 income years following the income year in which the expenditure is incurred, and deduct it in that income year; or
(c)
allocate parts of it over some or all of the 4 income years following the income year in which the expenditure is incurred, and deduct each part allocated in the income year to which it is allocated; or
(d)
deduct it, or any part of it that has not already been deducted, in the fourth income year following the income year in which the expenditure is incurred.
When subsection (5) applies
(4)
Subsection (5) applies when the person ceases to carry on the business before the end of the fourth tax year following the tax year in which the expenditure is incurred.
Business ceasing within 4 years
(5)
The person may do 1 of the following to the total amount of expenditure allowed as a deduction:
(a)
deduct it, or any part of it that has not already been deducted, in the income year in which the person ceases to carry on the business; or
(b)
allocate it, or any part of it that has not already been deducted, equally to the income year in which it is incurred and the following income years in which the person continues to carry on the business.
Some definitions
(6)
In this section,—
fishing boat—
(a)
means a boat registered as a fishing vessel under section 103 of the Fisheries Act 1996; and
(b)
includes a small boat belonging to any boat that is so registered
fishing business means a business of catching or taking fish, including crustaceans and shellfish, for the purposes of sale or exchange.
Defined in this Act: amount, business, deduction, fishing boat, fishing business, income year, New Zealand, tax year
Compare: 2004 No 35 s EJ 2
Section EJ 2(1): amended (with effect on 1 April 2014), on 30 March 2017, by section 68 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
Section EJ 2(1): amended (with effect on 1 April 2008), on 2 November 2012 (applying for the 2008–09 and later income years), by section 39(1) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section EJ 2(6) fishing boat paragraph (a): amended (with effect on 1 April 2008), on 2 November 2012 (applying for the 2008–09 and later income years), by section 39(2) of the Taxation (Annual Rates, Returns Filing, and Remedial Matters) Act 2012 (2012 No 88).
Section EJ 2(6) fishing business: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
EJ 3 Spreading forward of fertiliser expenditure
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)
the person incurs expenditure in acquiring fertiliser or lime or applying fertiliser or lime to some or all of the land; and
(c)
the expenditure is expenditure for which the person is allowed a deduction.
Timing of deduction: if election made
(2)
The person may choose to allocate the expenditure by allocating some or all of it, in the proportions they choose, to any 1 or more of the 4 income years following the income year in which they incur the expenditure.
Timing of deduction: if election not made
(3)
The person is allowed a deduction in the fourth income year following the income year in which they incur the expenditure for any part of the expenditure—
(a)
for which they do not claim a deduction in the income year in which they incur the expenditure; or
(b)
that they do not allocate under subsection (2).
Timing of deduction: business ceasing within 4 years
(4)
If the person ceases to carry on the business before the end of the fourth income year following the income year in which they incurred the expenditure, they must choose 1 of the following ways to deal with any part of the expenditure that has not so far been deducted:
(a)
the part is to be deducted in the income year in which the person ceases to carry on the business; or
(b)
the part is to be allocated equally to the income year in which they incurred the expenditure and the following income years in which the person carried on the business.
How elections made
(5)
An election under this section is made as follows:
(a)
a person makes an election under subsection (2) by taking a tax position on that basis in their return of income for the income year to which they choose to allocate some or all of the expenditure:
(b)
a person makes an election under subsection (4),—
(i)
paragraph (a), by taking a tax position on that basis in their return of income for the income year in which the person ceases to carry on the business:
(ii)
paragraph (b), by notifying the Commissioner of the allocation within the time within which the person is required to file a return of income for the income year in which the person ceases to carry on the business.
Extension of time: elections under subsection (4)(b)
(5B)
The Commissioner may extend the time limit imposed under subsection (5)(b)(ii) in any case or class of cases.
Personal representative
(6)
An election under subsection (4) may be made by a deceased’s personal representative.
Elections under subsection (2) irrevocable
(7)
An election made under subsection (2) cannot be revoked.
Defined in this Act: business, Commissioner, deduction, income year, New Zealand, notify, return of income, tax position
Compare: 2004 No 35 s EJ 3
Section EJ 3(1)(b): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on 24 February 2016, by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
Section EJ 3(5) heading: replaced (with effect on 1 April 2020), on 30 March 2021, by section 42(1) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 3(5): replaced (with effect on 1 April 2020), on 30 March 2021, by section 42(1) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 3(5B) heading: inserted (with effect on 1 April 2020), on 30 March 2021, by section 42(1) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 3(5B): inserted (with effect on 1 April 2020), on 30 March 2021, by section 42(1) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 3(7) heading: inserted (with effect on 1 April 2020), on 30 March 2021, by section 42(2) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 3(7): inserted (with effect on 1 April 2020), on 30 March 2021, by section 42(2) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 3 list of defined terms notice: repealed (with effect on 1 April 2020), on 30 March 2021, by section 42(3)(b) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 3 list of defined terms notify: inserted (with effect on 1 April 2020), on 30 March 2021, by section 42(3)(a) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 3 list of defined terms tax position: inserted (with effect on 1 April 2020), on 30 March 2021, by section 42(3)(a) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Films
EJ 4 Expenditure incurred in acquiring film rights in feature films
Feature films
(1)
A deduction for expenditure that a person incurs in acquiring a film right is allocated under this section if the film is a feature film and—
(a)
the deduction is allowed under section DS 1 (Acquiring film rights):
(b)
the deduction is allowed under section DS 2 (Film production expenditure) and the film is one for which a large budget film grant is made.
Timing of deduction: retention of film right
(2)
If the person has the film right at the end of an income year, the deduction that is allocated to the income year is the lesser of—
(a)
the greater of—
(i)
an apportioned amount of the deduction, calculated for the income year under subsection (3); and
(ii)
the amount of film income derived in the income year; and
(b)
the remaining deduction.
Calculation of apportioned amount
(3)
The apportioned amount is calculated for the income year using the formula—
(completed months ÷ non-completed months) × deduction.
Definition of items in formula
(4)
In the formula,—
(a)
completed months is the number of months in the income year, including a part of a month, for which the film is completed:
(b)
non-completed months is 24, reduced by the number of complete months in the period that—
(i)
starts on the first day of the month in which the film is completed; and
(ii)
ends on the last day of the income year before the income year referred to in subsection (2):
(c)
deduction is the remaining deduction.
Timing of deduction: disposal of film right
(5)
If the person disposes of the film right during an income year, and does not have a film right in the film at the end of the income year, the remaining deduction is allocated to the income year.
Meaning of remaining deduction
(6)
In this section, remaining deduction means, for an income year, the amount of the deduction for expenditure incurred before the end of the income year that has not been allocated to an earlier income year.
Defined in this Act: amount, completed, deduction, feature film, film, film income, film right, income year, large budget film grant, remaining deduction
Compare: 2004 No 35 s EJ 4
Section EJ 4(1): substituted, on 1 April 2008, by section 360 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EJ 4(1)(b): substituted, on 1 January 2010, by section 123(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EJ 4(1)(b): amended (with effect on 1 January 2010), on 7 September 2010, by section 32(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 4 list of defined terms government screen production payment: repealed (with effect on 1 January 2010), on 7 September 2010, by section 32(2)(a) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 4 list of defined terms large budget film grant: inserted (with effect on 1 January 2010), on 7 September 2010, by section 32(2)(b) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
EJ 5 Expenditure incurred in acquiring film rights in films other than feature films
Films other than feature films
(1)
A deduction for expenditure that a person incurs in acquiring a film right is allocated under this section if the film is not a feature film and—
(a)
the deduction is allowed under section DS 1 (Acquiring film rights):
(b)
the deduction is allowed under section DS 2 (Film production expenditure) and the film is one for which a large budget film grant is made.
Timing of deduction: retention of film right
(2)
If the person has the film right at the end of an income year,—
(a)
the deduction that is allocated to the income year in which the film right is acquired or the film is completed, whichever is later, is—
(i)
50% of the deduction; or
(ii)
if the film income derived in the income year is more than 50% of the deduction, the lesser of the amount of film income and the total amount of the deduction; and
(b)
the deduction that is allocated to the next income year is the remaining deduction.
Timing of deduction: disposal of film right
(3)
If the person disposes of the film right during an income year, and does not have a film right in the film at the end of the income year, the remaining deduction is allocated to the income year.
Meaning of remaining deduction
(4)
In this section, remaining deduction means, for an income year, the amount of the deduction that has not been allocated to an earlier income year.
Defined in this Act: amount, completed, deduction, feature film, film, film income, film right, income year, large budget film grant, remaining deduction
Compare: 2004 No 35 s EJ 5
Section EJ 5(1): substituted, on 1 April 2008, by section 361 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EJ 5(1)(b): substituted, on 1 January 2010, by section 124(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EJ 5(1)(b): amended (with effect on 1 January 2010), on 7 September 2010, by section 33(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 5 list of defined terms government screen production payment: repealed (with effect on 1 January 2010), on 7 September 2010, by section 33(2)(a) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 5 list of defined terms large budget film grant: inserted (with effect on 1 January 2010), on 7 September 2010, by section 33(2)(b) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
EJ 6 Certification of New Zealand films
Certification of New Zealand films
(1)
The New Zealand Film Commission may certify that a film is a New Zealand film, if the Commission is satisfied that the film has, or will on completion have, a significant New Zealand content, as determined under section 18 of the New Zealand Film Commission Act 1978.
Final and provisional certificates
(2)
The certificate issued by the New Zealand Film Commission must be—
(a)
a provisional certificate, if the film is not completed:
(b)
a final certificate, if the film is completed.
Applications for certification of New Zealand films
(3)
An application to the New Zealand Film Commission for a certificate that a film is a New Zealand film must be in writing and must provide the information that the Commission requires.
Notice of certificate to Commissioner
(4)
The New Zealand Film Commission must send a copy of the provisional certificate or the final certificate to the Commissioner immediately after issuing it.
Revocation of certificate
(5)
The New Zealand Film Commission may revoke a provisional certificate or a final certificate if the Commission is satisfied that the certificate should not remain in force, whether because an incorrect statement was made in the provision of information for the purpose of obtaining a certificate or for any other reason.
Effect of revocation
(6)
A revoked certificate is void from the time the certificate was issued.
Notice of revocation to Commissioner
(7)
The New Zealand Film Commission must give notice to the Commissioner immediately after revoking a provisional certificate or a final certificate.
Defined in this Act: Commissioner, completed, film, New Zealand, notice
Compare: 2004 No 35 s EJ 6
EJ 7 Film production expenditure for New Zealand films having no large budget film grant
New Zealand films
(1)
A deduction under section DS 2 (Film production expenditure) for film production expenditure is allocated under this section if—
(a)
the film is not one for which a large budget film grant is made; and
(b)
the film has a final certificate under section EJ 6.
Timing of deduction: up to completion of film
(2)
A deduction for film production expenditure incurred in or before the income year in which the film is completed is allocated to the income year in which the film is completed.
Timing of deduction: after completion of film
(3)
A deduction for film production expenditure incurred after the film is completed is allocated to the income year in which it is incurred.
Defined in this Act: completed, deduction, film, film production expenditure, income year, large budget film grant, New Zealand
Compare: 2004 No 35 s EJ 7
Section EJ 7 heading: amended (with effect on 1 January 2010), on 7 September 2010, by section 34(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 7 heading: amended, on 1 January 2010, by section 125(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EJ 7 heading: amended, on 1 April 2008, by section 362(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EJ 7(1): substituted, on 1 April 2008, by section 362(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EJ 7(1)(a): substituted, on 1 January 2010, by section 125(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EJ 7(1)(a): amended (with effect on 1 January 2010), on 7 September 2010, by section 34(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 7 list of defined terms government screen production payment: repealed (with effect on 1 January 2010), on 7 September 2010, by section 34(3)(a) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 7 list of defined terms large budget film grant: inserted (with effect on 1 January 2010), on 7 September 2010, by section 34(3)(b) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
EJ 8 Film production expenditure for other films having no large budget film grant
Films other than New Zealand films
(1)
A deduction under section DS 2 (Film production expenditure) for film production expenditure is allocated under this section if—
(a)
the film is not one for which a large budget film grant is made; and
(b)
the film does not have a final certificate under section EJ 6.
Timing of deduction: up to completion of film
(2)
If the person has a film right at the end of the income year in which the film is completed, the deduction for film production expenditure incurred in or before the income year is allocated as follows:
(a)
to the income year in which the film is completed,—
(i)
50% of the deduction; or
(ii)
if the film income derived in the income year is more than 50% of the deduction, the lesser of the amount of film income and the total amount of the deduction; and
(b)
to the next income year, the remaining deduction.
Timing of deduction: after completion of film
(3)
If the person has a film right in an income year after the film is completed, a deduction for film production expenditure incurred after the film is completed is allocated to the income year in which it is incurred.
Timing of deduction: disposal of film right
(4)
If the person disposes of a film right in the income year in which the film is completed, and does not have a film right in the film at the end of the income year, the remaining deduction is allocated to the income year.
Meaning of remaining deduction
(5)
In this section, remaining deduction means, for an income year, the amount of the deduction for film production expenditure that has not been allocated to an earlier income year.
Defined in this Act: amount, completed, deduction, film, film income, film production expenditure, film right, income year, large budget film grant, New Zealand, remaining deduction
Compare: 2004 No 35 s EJ 8
Section EJ 8 heading: substituted, on 1 April 2008, by section 363(1) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EJ 8 heading: amended (with effect on 1 January 2010), on 7 September 2010, by section 35(1) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 8 heading: amended, on 1 January 2010, by section 126(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EJ 8(1): substituted, on 1 April 2008, by section 363(2) of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
Section EJ 8(1)(a): substituted, on 1 January 2010, by section 126(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EJ 8(1)(a): amended (with effect on 1 January 2010), on 7 September 2010, by section 35(2) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 8 list of defined terms government screen production payment: repealed (with effect on 1 January 2010), on 7 September 2010, by section 35(3)(a) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
Section EJ 8 list of defined terms large budget film grant: inserted (with effect on 1 January 2010), on 7 September 2010, by section 35(3)(b) of the Taxation (Annual Rates, Trans-Tasman Savings Portability, KiwiSaver, and Remedial Matters) Act 2010 (2010 No 109).
EJ 9 Avoidance arrangements
The allocation of a deduction under any of sections EJ 4, EJ 5, EJ 7, and EJ 8 may be subject to adjustment under—
(a)
section GB 18 (Arrangements to acquire film rights or incur production expenditure):
(b)
section GB 19 (When film production expenditure payments delayed or contingent).
Defined in this Act: deduction, film production expenditure, film right, pay
Leases
EJ 10 Personal property lease payments
What this section applies to
(1)
This section applies to a lease that—
(a)
is of a personal property lease asset; and
(b)
is not a finance lease; and
(c)
is not a specified lease; and
(d)
is not an operating lease to which section EJ 10B applies.
Payments
(2)
Personal property lease payments are treated as being paid for the term of the lease.
Formula
(3)
The expenditure that the lessee incurs is allocated to income years using the formula—
(part of term ÷ term of the lease) × total of payments.
Definition of items in formula
(4)
In the formula,—
(a)
part of term is the part of the term of the lease that falls within the income year:
(b)
term of the lease has the meaning given in section YA 1 (Definitions):
(c)
total of payments is the total amount of the personal property lease payments.
Defined in this Act: finance lease, income year, lease, lessee, operating lease, pay, personal property lease asset, personal property lease payment, specified lease, term of the lease
Compare: 2004 No 35 s EJ 9
Section EJ 10(1)(d): inserted (with effect on 1 January 2019), on 30 March 2021, by section 43(1) (and see section 43(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 10 list of defined terms operating lease: inserted (with effect on 1 January 2019), on 30 March 2021, by section 43(2) (and see section 43(3) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
EJ 10B IFRS leases
When this section applies
(1)
This section applies in relation to an operating lease of a personal property lease asset (the IFRS lease), if—
(a)
the person, as lessee, uses NZ IFRS 16 in their financial statements for the IFRS lease; and
(b)
the lessor for the IFRS lease is not associated with the person; and
(c)
the person does not sublease the personal property lease asset to another person; and
(d)
the person irrevocably chooses to use this section for the IFRS lease, as evidenced by a return of income made in accordance with this section.
Deduction: de minimis
(2)
If the initial right of use asset under NZ IFRS 16 is $100,000 or less and the remaining term of the IFRS lease under NZ IFRS 16 is 4 years or less initially and immediately after any extension starts, then the person, as lessee for the IFRS lease, is allowed, for an income year, a deduction for a positive amount, and has income for a negative amount, for the total amount recognised by the person through their profit and loss account for the IFRS lease for the income year, if the amount is in accordance with NZ IFRS 16.
Deduction: formula
(3)
If subsection (2) does not apply, then the person, as lessee for the IFRS lease, is allowed, for an income year, a deduction for a positive amount, and has income for a negative amount, for amounts calculated using the formula—
accounting amount − add-back adjustment + impairment and revaluation adjustment − make-good and direct costs adjustment.
Definition of items in formula
(4)
In the formula in subsection (3),—
(a)
accounting amount is the total amount recognised by the person through their profit and loss account for the IFRS lease for the income year, if the amount is in accordance with NZ IFRS 16:
(b)
add-back adjustment is the total amount of the accounting measures in subparagraphs (i) and (ii), used by the person in accordance with IFRS through their profit and loss account for the income year—
(i)
impairment of the lease asset described in paragraph 33 of NZ IFRS 16 arising in the income year:
(ii)
revaluation or impairment of the lease asset described in paragraph 35 of NZ IFRS 16 arising in the income year:
(c)
impairment and revaluation adjustment is the total amount of the add-back adjustment for any income year under paragraph (b) spread proportionally on a daily basis over the remaining income years of the lease term:
(d)
make-good and direct costs adjustment is the total amount of the accounting measures in subparagraphs (i) and (ii), spread proportionally on a daily basis over the remaining income years of the lease term—
(i)
make-good costs for the lease described in paragraph 24(d) of NZ IFRS 16:
(ii)
direct costs for the lease described in paragraph 24(c) of NZ IFRS 16, if the person chooses to apply this subparagraph, as evidenced by a return of income made in accordance with this subparagraph.
Deduction: incurred
(5)
The person, as lessee, is allowed a deduction for the IFRS lease for—
(a)
make-good costs, described in subsection (4)(d)(i), for the income year that they incur the costs:
(b)
direct costs, described in subsection (4)(d)(ii), for the income year that they incur the costs, if they have chosen to apply subsection (4)(d)(ii).
Wash-up: income or deduction
(6)
The person, as lessee, has income for a positive amount, and is allowed a deduction for a negative amount, for the income year in which the IFRS lease ends or does not meet a requirement in subsection (1)(a), (b), or (c), calculated using the formula—
IFRS deductions − IFRS income − expenditure.
Definition of items in formula
(7)
In the formula in subsection (6),—
(a)
IFRS deductions is the total amount deducted for the IFRS lease for all income years, including when the person has not applied this section:
(b)
IFRS income is the total amount of income for the IFRS lease for all income years, including when the person has not applied this section:
(c)
expenditure is the amount of expenditure for the IFRS lease for all income years, ignoring this section.
Transitional deduction: retrospective treatment spread forward
(8)
If the person has applied NZ IFRS 16 retrospectively for the IFRS lease or has not applied this section for the IFRS lease while they have applied NZ IFRS 16 for it, then the person is allowed a deduction for a positive amount and has income for a negative amount, spread in equal proportions over the income year and the following 4 income years, calculated using the formula—
retrospective accounting expenditure − retrospective tax adjustments − previous tax deductions.
Definition of items in formula
(9)
In the formula in subsection (8),—
(a)
retrospective accounting expenditure is the total amount of expenditure or loss recognised under NZ IFRS 16 for the IFRS lease for the income years that the person has applied NZ IFRS 16 retrospectively for the IFRS lease or has not applied this section for the IFRS lease while they have applied NZ IFRS 16 for it, if the amount is in accordance with NZ IFRS 16:
(b)
retrospective tax adjustments is the total amount of adjustments and deductions in subsections (4)(b), (c), and (d) and (5) for the income years that the person has applied NZ IFRS 16 retrospectively for the IFRS lease or has not applied this section for the IFRS lease while they have applied NZ IFRS 16 for it, treating subsections (4)(b), (c), and (d) and (5) as applying for those income years:
(c)
previous tax deductions is the total amount of deductions not in accordance with NZ IFRS 16 and not provided by this section, for the income years that the person has applied NZ IFRS 16 retrospectively for the IFRS lease or has not applied this section for the IFRS lease while they have applied NZ IFRS 16 for it.
Defined in this Act: amount, deduction, income, income year, NZ IFRS 16, operating lease, person, personal property lease asset
Section EJ 10B: inserted (with effect on 1 January 2019), on 30 March 2021, by section 44(1) (and see section 44(2) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
Section EJ 10B(6): amended (with effect on 1 January 2019), on 30 March 2022, by section 84(1)(a) (and see section 84(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
Section EJ 10B(6): amended (with effect on 1 January 2019), on 30 March 2022, by section 84(1)(b) (and see section 84(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
EJ 11 Amount paid by lessee for non-compliance with covenant for repair
When this section applies
(1)
This section applies when a lessee of land is allowed a deduction under section DB 21 (Amounts paid for non-compliance with covenant for repair).
Timing of deduction
(2)
The lessee may choose to allocate some or all of the amount of the deduction to any 1 or more of the 3 income years before the income year in which the amount is paid or recovered. The lessee may make an allocation only to an income year in which they used the land for deriving income.
Effect of allocation
(3)
If the lessee makes an allocation,—
(a)
they are denied a deduction for the allocated amount in the income year in which the amount of the deduction is paid or recovered; and
(b)
they are allowed a deduction for the allocated amount in the income year to which it is allocated.
Notice
(4)
The following provisions apply to an allocation for the purposes of subsection (2):
(a)
the lessee makes the election by giving a notice to the Commissioner that specifies how the amount of the deduction has been allocated; and
(b)
the lessee must give the notice within the time required to file a return of income for the tax year in which the amount was paid or recovered or within a longer time if the Commissioner agrees; and
(c)
the lessee must not revoke the allocation.
Defined in this Act: amount, Commissioner, deduction, income, income year, lessee, notice, return of income, tax year
Compare: 2004 No 35 s EJ 10
Petroleum mining
EJ 12 Petroleum development expenditure: default allocation rule
When this section applies
(1)
This section applies to a petroleum miner’s petroleum development expenditure that relates to petroleum mining developments in a permit area and that is incurred on or after 1 April 2008, when section EJ 12B does not apply to the expenditure.
Default allocation rule
(2)
For the purposes of section DT 5(2)(a) (Petroleum development expenditure), a deduction for the petroleum development expenditure is allocated in equal amounts over a period of 7 income years. The period of 7 years starts with the income year in which the expenditure is incurred.
Relationship with other petroleum mining provisions
(3)
Sections EJ 13 to EJ 16 override subsection (2). Sections DT 7, DT 8, DT 10, DT 11, and DT 16 (which relate to petroleum miners) override this section.
Defined in this Act: amount, deduction, income year, permit area, petroleum development expenditure, petroleum miner, petroleum mining development
Section EJ 12: substituted (with effect on 1 April 2008), on 6 October 2009, by section 127(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EJ 12(3): amended, on 1 April 2018, by section 70(1) (and see section 70(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
EJ 12B Petroleum development expenditure: reserve depletion method
When this section applies
(1)
This section applies to a petroleum miner’s petroleum development expenditure that relates to petroleum mining developments in a permit area, when the expenditure is incurred—
(a)
on or after 1 April 2008; and
(b)
an election to apply this section, described in subsection (2), is made for the permit area.
Choice: first year of commercial production and later years
(2)
An election to apply this section may be made by a petroleum miner for a permit area, in a return of income for an income year, only if that income year is the first one in which petroleum is produced in commercial quantities in the permit area. The election is irrevocable, and applies this section to petroleum development expenditure that relates to petroleum mining developments in the relevant permit area for the income year and later income years.
Reserve depletion method expense allocation rule
(3)
For the purposes of section DT 5(2)(b) (Petroleum development expenditure), the deduction allocated to an income year for the petroleum development expenditure that relates to a petroleum mining development in the relevant permit area is the amount calculated using the following formula, if the amount is positive:
(reserve expenditure − previous expenditure)
× reserve depletion for the year ÷ probable reserves.
Definition of items in formula
(4)
The items in the formula are defined in subsections (5) to (8).
Reserve expenditure
(5)
Reserve expenditure is the total petroleum development expenditure that relates to the petroleum mining development for the income year or an earlier income year to which this section applied.
Previous expenditure
(6)
Previous expenditure is the total petroleum development expenditure that relates to the petroleum mining development and that has been allocated to an earlier income year to which this section applied.
Reserve depletion for the year
(7)
Reserve depletion for the year is the amount, expressed in barrels of oil equivalent, of petroleum produced from the petroleum mining development for the income year.
Probable reserves
(8)
Probable reserves is the amount, expressed in barrels of oil equivalent, of the reserves of petroleum for the petroleum mining development that are not yet proven but are estimated, at the beginning of the income year, to have a better than 50% chance of being technically and commercially producible.
Relationship with other petroleum mining provisions
(9)
Sections EJ 13 to EJ 16 override subsection (3). Sections DT 7, DT 8, DT 10, DT 11, and DT 16 (which relate to petroleum miners) override this section.
Defined in this Act: amount, deduction, income year, permit area, petroleum development expenditure, petroleum miner, petroleum mining development
Section EJ 12B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 127(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
Section EJ 12B(9): amended, on 1 April 2018, by section 71(1) (and see section 71(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
EJ 13 Permanently ceasing petroleum mining operations
When this section applies
(1)
This section applies when a petroleum miner and each farm-in party to a farm-out arrangement, if any, to which the petroleum miner is a party, permanently ceases petroleum mining operations—
(a)
in a permit area for which the petroleum miner holds a petroleum permit; and
(b)
for which petroleum development expenditure has been incurred.
Amount of deduction for petroleum miner
(2)
The amount of the deduction that the petroleum miner is allowed is the difference between—
(a)
the amount of the deduction allowed for the petroleum miner under section DT 5 (Petroleum development expenditure) and attributable to—
(i)
the permit; or
(ii)
an asset of the kind described in section CT 7(1)(b) or (c) (Meaning of petroleum mining asset) held solely in connection with the permit; and
(b)
any part of the deduction for the petroleum miner allocated to, or treated as allocated to, earlier income years under section EJ 12(2) or EJ 12B(3).
Amount of deduction for farm-in party
(3)
The amount of the deduction that the farm-in party is allowed is the difference between—
(a)
the amount of the deduction allowed for the farm-in party under section DT 14 (Farm-out arrangements) for petroleum development expenditure, and attributable to—
(i)
the permit; or
(ii)
an asset of the kind described in section CT 7(1)(b) or (c) held solely in connection with the permit; and
(b)
any part of the deduction for the farm-in party allocated to, or treated as allocated to, earlier income years under section EJ 12(2) or EJ 12B(3).
Timing of deduction
(4)
For the purposes of section DT 5(2)(c) (Petroleum development expenditure), the deduction is allocated to the income year in which petroleum mining operations permanently cease.
Defined in this Act: amount, deduction, farm-in party, farm-out arrangement, income year, permit area, petroleum development expenditure, petroleum miner, petroleum mining operations, petroleum permit
Section EJ 13: replaced, on 1 April 2018, by section 72(1) (and see section 72(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
EJ 13B Dry well drilled
When this section applies
(1)
This section applies when—
(a)
the petroleum miner has petroleum development expenditure for a well, the drilling of which stops in an income year, and, from the time of stopping, the well—
(i)
will never produce petroleum in commercial quantities; and
(ii)
is abandoned; and
(b)
part of a deduction under section DT 5 (Petroleum development expenditure) for the petroleum development expenditure described in paragraph (a) has not been allocated under section EJ 12 or EJ 12B.
Allocation
(2)
The part of the deduction described in subsection (1) is allocated to the income year.
Defined in this Act: amount, deduction, income year, petroleum development expenditure
Section EJ 13B: inserted (with effect on 1 April 2008), on 6 October 2009, by section 129(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EJ 13C Well not producing
When this section applies
(1)
This section applies when—
(a)
the petroleum miner has petroleum development expenditure for a well that, in an income year—
(i)
stops producing petroleum in commercial quantities; and
(ii)
is abandoned; and
(b)
the petroleum miner has elected to apply section EJ 12B for the petroleum development expenditure described in paragraph (a) before the start of the income year; and
(c)
part of a deduction under section DT 5 (Petroleum development expenditure) for the petroleum development expenditure described in paragraphs (a) and (b) has not been allocated under section EJ 12B.
Allocation
(2)
The part of the deduction described in subsection (1) is allocated to the income year.
Defined in this Act: amount, deduction, income year, petroleum development expenditure
Section EJ 13C: inserted (with effect on 1 April 2008), on 6 October 2009, by section 129(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EJ 14 Spreading deduction backwards
[Repealed]Section EJ 14: repealed, on 1 April 2018, by section 73(1) (and see section 73(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
EJ 15 Disposal of petroleum mining asset
When this section applies
(1)
This section applies when a petroleum miner disposes of a petroleum mining asset.
Amount, and timing, of deduction
(2)
Part of a deduction under section DT 5 (Petroleum development expenditure) is allocated to the income year in which the miner disposes of the asset. The part is that to which both the following apply:
(a)
it is attributable to the asset; and
(b)
it has not been allocated under section EJ 12 or EJ 12B to the income year in which the miner disposes of the asset or to an earlier income year.
Allocation to more than 1 year
(3)
If the petroleum miner’s income from disposing of the asset is derived in 2 or more income years,—
(a)
the amount of the deduction is allocated among the income years in which the miner derives the income; and
(b)
the amount allocated to each income year bears the same relation to the total amount of the deduction as the income that the miner derives in that income year bears to the total amount of income that the miner derives from the disposal.
Relationship with section EJ 16
(4)
This section is overridden by section EJ 16.
Defined in this Act: amount, deduction, dispose, income, income year, petroleum miner, petroleum mining asset
Compare: 2004 No 35 s EJ 13
Section EJ 15(2)(b): substituted (with effect on 1 April 2008), on 6 October 2009, by section 130(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
EJ 16 Disposal of petroleum mining asset to associate
When this section applies
(1)
This section applies when, in an income year, a petroleum miner disposes of a petroleum mining asset to—
(a)
a person associated with the miner:
(b)
a person who holds the asset for the miner:
(c)
a person who holds the asset for a person associated with the miner.
Amount of deduction
(2)
The maximum amount that may be allocated under section EJ 15 to the income year is the amount that would be the net income of the petroleum miner in the income year if their only income were from the disposal.
Defined in this Act: amount, associated person, dispose, income, income year, net income, petroleum miner, petroleum mining asset
Compare: 2004 No 35 s EJ 14
EJ 17 Partnership interests and disposal of part of asset
In sections EJ 12 to EJ 16, 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.