Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 5: Transaction costs: borrowing money for use as capital

You could also call this:

“Deducting costs when borrowing money for business investments”

You can deduct the costs of borrowing money if you use that money as capital to earn income. This means if you take out a loan to invest in your business or other income-generating activities, you can claim the expenses related to getting that loan.

However, there’s a special rule called Subpart DG that might change how this works for certain assets. If that rule applies to your situation, it takes priority over this one.

While this rule overrides the usual limits on capital expenses, you still need to meet the general permission for deductions. You also need to follow other general limitations that apply to deductions.

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 It might be out of date or be missing some parts.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=DLM1513582.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
Previous

DB 4B: Fees to purchase funds in tax pooling accounts, or

“Tax deduction for fees paid when using tax pooling to pay certain taxes”

Next

DB 6: Interest: not capital expenditure, or

“Interest payments can be claimed as a deduction, even if related to capital spending”

Part D Deductions
Specific rules for expenditure types

DB 5Transaction costs: borrowing money for use as capital

  1. A person is allowed a deduction for expenditure incurred in borrowing money that is used as capital in deriving their income.

  2. Subpart DG (Expenditure related to use of certain assets) overrides this section for expenditure to which that subpart relates.

  3. This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.

Compare
Notes
  • Section DB 5(1B) heading: inserted (with effect on 1 April 2013 and applying for the 2013–14 and later income years), on , by section 24(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
  • Section DB 5(1B): inserted (with effect on 1 April 2013 and applying for the 2013–14 and later income years), on , by section 24(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).