Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 3: Determining tax liabilities

You could also call this:

“How to claim tax deductions for costs related to managing your tax affairs”

You can deduct money you spend on figuring out your tax responsibilities. This includes working out your income tax for the year and your GST for each tax period. It also covers costs for objecting to or appealing tax decisions.

You can even deduct money you give to someone else if they’re fighting a tax decision that affects your own tax bill. But remember, this only applies if you’ve also objected to or appealed the decision.

However, you can’t deduct costs for things like making a false tax return, committing tax crimes, or being penalised for not following tax rules. You also can’t deduct costs for silly objections or appeals.

If you’re dealing with GST issues, you can only deduct costs if they’re related to your business activities.

This rule adds to the general permission for deductions. It overrides some limits on deductions, like those for capital expenses, private expenses, and employment expenses. But other general limits still apply.

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 It might be out of date or be missing some parts.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=DLM1513576.

Topics:
Money and consumer rights > Taxes
Previous

DB 2: Goods and services tax, or

“Rules for GST deductions and how they affect your taxes”

Next

DB 3B: Use of money interest, or

“Deducting interest payments required by tax law”

Part D Deductions
Specific rules for expenditure types

DB 3Determining tax liabilities

  1. A person is allowed a deduction for expenditure that they incur in connection with the following matters:

  2. calculating or determining their income tax liability for a tax year:
    1. calculating or determining the GST payable by them in a taxable period:
      1. preparing, instituting, or presenting an objection or challenge to, or an appeal following, a determination or assessment made under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985:
        1. making a contribution towards the expenditure incurred by another person if—
          1. the other person is allowed a deduction for that expenditure; and
            1. the expenditure relates to a matter affecting the determination of the first person’s liability for income tax or GST; and
              1. the first person has objected to, challenged, or appealed against an assessment or determination made in relation to the matter under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985.

              2. This section does not apply to expenditure that a person incurs in connection with the following matters:

              3. a matter arising from a return of income or a return under the Goods and Services Tax Act 1985 that was fraudulent or wilfully misleading:
                1. an offence under any of the Inland Revenue Acts:
                  1. a shortfall penalty assessed under this Act or an earlier Act, the Tax Administration Act 1994, or the Goods and Services Tax Act 1985 (but not an assessment that is later cancelled):
                    1. an objection, challenge, or appeal that is inconsequential or frivolous:
                      1. a matter arising under the Goods and Services Tax Act 1985 to the extent to which it relates to a taxable activity that does not constitute a business for the purposes of this Act.

                        1. In this section, taxable activity is defined in section 6 of the Goods and Services Tax Act 1985.

                        2. This section supplements the general permission and overrides the capital limitation, the private limitation, and the employment limitation. The other general limitations still apply.

                        Compare
                        Notes
                        • Section DB 3(4): substituted (with effect on 1 April 2008), on , by section 68(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
                        • Section DB 3(4) list of defined terms capital limitation: inserted (with effect on 1 April 2008), on , by section 68(2) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).