Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Income - Excluded income - Definitions

CX 47: Government grants to businesses

You could also call this:

“Government payments to businesses for certain expenses are not taxable income”

This section is about government grants to businesses. It applies when a local authority, public authority, or public purpose Crown-controlled company gives money to a person for their business. The payment must be a grant, subsidy, or a special type of loan called a grant-related suspensory loan. It can’t be a regular loan or advance.

The payment must be for expenses the business has or will have. These expenses would normally be tax-deductible or count as depreciation if it weren’t for a specific rule in the tax law.

When you get this kind of payment, it doesn’t count as income you have to pay tax on. This is called ‘excluded income’.

There are some exceptions to this rule:

  1. If you get a grant from the Agriculture Recovery Programme for the Lower North Island and Eastern Bay of Plenty, it might still count as income if it’s for expenses you’ve already had.

  2. If you get a research and development growth grant, you can choose whether to count it as income or not. This might be useful if you want to claim tax deductions for your research expenses in an earlier tax year.

  3. If you get an RDTI transition support payment, this rule doesn’t apply to that payment.

Remember, these are just general explanations. If you need to know how this applies to your specific situation, you should talk to a tax expert.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513448.

Topics:
Money and consumer rights > Taxes
Previous

CX 46: Repayment of loans made from reinvestment profit, or

“Outdated rule about repaying loans from reinvestment profit no longer applies”

Next

CX 48: Amounts remitted as condition of new start grant, or

“ This rule about debt forgiveness for new start grants has been removed from the law ”

Part C Income
Excluded income: Definitions

CX 47Government grants to businesses

  1. This section applies when—

  2. a local authority, a public authority, or a public purpose Crown-controlled company makes a payment to a person for a business that the person carries on; and
    1. the payment—
      1. is in the nature of a grant or subsidy to the person; or
        1. is a grant-related suspensory loan to the person; and
        2. the payment is not in the nature of an advance or loan other than a grant-related suspensory loan; and
          1. the payment corresponds to—
            1. expenditure that they incur and for which they would be allowed a deduction in the absence of section DF 1 (Government grants to businesses):
              1. expenditure that they incur in acquiring, constructing, installing, or extending an asset for which they would have an amount of depreciation loss in the absence of section DF 1.

              2. The payment is excluded income of the person.

              3. This section does not apply to a grant made under the Agriculture Recovery Programme for the Lower North Island and Eastern Bay of Plenty, to the extent to which the grant relates to expenditure—

              4. incurred by the recipient before the grant; and
                1. for which the recipient would be allowed a deduction in the absence of section DF 1.

                  1. A person may choose that this section not apply to a payment under a grant to the extent to which—

                  2. the grant is made to the person for the person's business as a research and development growth grant; and
                    1. the payment is withheld until the conditions of the grant are satisfied; and
                      1. in the absence of section DF 1, the person would be allowed for an income year before the income year of the payment,—
                        1. a deduction for expenditure to which the payment corresponds:
                          1. depreciation loss resulting from expenditure to which the payment corresponds.

                          2. This section does not apply to an RDTI transition support payment.

                          Compare
                          Notes
                          • Section CX 47(1)(a): substituted (with effect on 1 October 2010), on , by section 35(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                          • Section CX 47(1)(a): amended (with effect on 18 March 2019), on , by section 30(1) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).
                          • Section CX 47(1)(b): substituted (with effect on 1 October 2010), on , by section 35(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                          • Section CX 47(1)(c): substituted (with effect on 1 October 2010), on , by section 35(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                          • Section CX 47(1)(d): substituted (with effect on 1 October 2010), on , by section 35(1) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                          • Section CX 47(3) heading: substituted (with effect on 1 October 2009), on , by section 56(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section CX 47(3): substituted (with effect on 1 October 2009), on , by section 56(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section CX 47(4) heading: added (with effect on 1 October 2010), on , by section 35(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                          • Section CX 47(4): added (with effect on 1 October 2010), on , by section 35(2) of the Taxation (GST and Remedial Matters) Act 2010 (2010 No 130).
                          • Section CX 47(4)(a): amended, on , by section 39 of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
                          • Section CX 47(5) heading: inserted (with effect on 1 April 2019), on , by section 60(1) (and see section 60(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                          • Section CX 47(5): inserted (with effect on 1 April 2019), on , by section 60(1) (and see section 60(2) for application) of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
                          • Section CX 47 list of defined terms large budget screen production grant: repealed (with effect on 1 October 2009), on , by section 52(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                          • Section CX 47 list of defined terms public purpose Crown-controlled company: inserted (with effect on 18 March 2019), on , by section 30(2) of the Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Act 2023 (2023 No 5).