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Income Tax Act 2007

Income - Income from business or trade-like activities - Exclusion for investment land

CB 28: Environmental restoration accounts

You could also call this:

“How income is calculated from environmental restoration account refunds and transfers”

When you get a refund from your environmental restoration account for a tax year, you earn income in the matching income year. You calculate this income by dividing the refund amount by the tax rate.

If money is moved from your environmental restoration account, you also earn income in that year. You work out this income by dividing the transferred amount by the tax rate.

The tax rate used in these calculations is the highest rate of income tax that would apply to you if you had enough taxable income.

If you spend money on certain environmental activities and get a tax deduction based on how long your resource consent lasts, you might have to report some income later. This happens if your resource consent is extended by more than half its original length or if you get a new consent that’s more than half as long as the original. In this case, you report income in the year the consent is extended or the new one is granted. The amount is the difference between what you’ve already deducted and what you would have deducted if the consent had been for 35 years from the start.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1512479.

Topics:
Money and consumer rights > Taxes
Environment and resources > Conservation
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Part C Income
Income from business or trade-like activities: Exclusion for investment land

CB 28Environmental restoration accounts

  1. A person who receives a refund for a tax year under section EK 12 (Refund if application or excess balance) derives for the person’s corresponding income year an amount of income calculated using the formula—

    refund ÷ tax rate.

    Where:

    • If there is a transfer from a person’s environmental restoration account under section EK 15, EK 16, or EK 19 (which relate to environmental restoration accounts), the person derives for the corresponding income year an amount of income calculated using the formula—

      transfer ÷ tax rate.

      Where:

      • The items in the formulas are defined in subsections (4) to (6).

      • Refund is the amount of the refund.

      • Tax rate is the highest rate of income tax on taxable income that—

      • is set out in schedule 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits); and
        1. would apply to the person for the tax year if the person had sufficient taxable income.

          1. Transfer is the amount in the environmental restoration account that is transferred.

          2. A person who incurs expenditure of a type listed in schedule 19, part A, clauses 2 to 5 (Expenditure in avoiding, remedying, or mitigating detrimental effects of discharge of contaminant or making of noise) and not in schedule 19, part C derives income under subsection (8) if—

          3. the deduction under section DB 46 (Avoiding, remedying, or mitigating effects of discharge of contaminant or making of noise) for the expenditure is determined by the period for which a resource consent is granted; and
            1. the period of the grant of the resource consent is extended by more than 50% in a later income year or a new resource consent is granted for a period that is more than 50% of the total period of the resource consent.

              1. The person derives for the income year in which the period of the resource consent is extended, or the new resource consent is granted, an amount of income equal to the greater of zero and the difference between—

              2. the total deduction under section DB 46 for the person for the period from the grant of the resource consent to the beginning of the income year:
                1. the total deduction for the expenditure that the person would have had under section DB 46 for the period referred to in paragraph (a), if the period of the resource consent at the time of the grant had been 35 years.

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                  Notes
                  • Section CB 28(1): amended, on , by section 6(1) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).
                  • Section CB 28(5)(a): amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).
                  • Section CB 28(7): amended (with effect on 1 April 2018), on , by section 127(a) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                  • Section CB 28(7)(a): amended (with effect on 1 April 2018), on , by section 127(b) of the Taxation (Annual Rates for 2018–19, Modernising Tax Administration, and Remedial Matters) Act 2019 (2019 No 5).
                  • Section CB 28 list of defined terms apply: inserted, on , by section 6(2) of the Taxation (Transformation: First Phase Simplification and Other Measures) Act 2016 (2016 No 27).