Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 15: Sureties

You could also call this:

“Rules for tax deductions when you guarantee someone else's debt”

If you’re a surety, which means you promise to pay someone else’s debt if they can’t, this law is about when you can’t get a tax deduction for money you lose because of that promise.

You can’t get a tax deduction for any money you lose as a surety if the loss happened because of things you did, or things done by people connected to you. This includes things that happened or didn’t happen that you or your connected people could have controlled.

For example, if you’re a surety for your friend’s loan, and you had to pay because your friend didn’t, you can’t get a tax deduction if you or someone connected to you made your friend unable to pay.

This rule is stronger than the general rule that usually lets you claim deductions. It means that even if you’d normally be allowed to claim the loss, you can’t if it falls under this rule.

Remember, this law is about tax deductions for sureties. It doesn’t change your responsibility as a surety, just whether you can claim a tax deduction for losses from being a surety.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513606.

Topics:
Money and consumer rights > Taxes
Money and consumer rights > Banking and loans
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Part D Deductions
Specific rules for expenditure types

DB 15Sureties

  1. This section applies when a surety incurs expenditure or loss under a security arrangement.

  2. Neither the surety nor a person with whom the surety was an associated person over the security arrangement’s term is allowed a deduction for the expenditure or loss to the extent to which the expenditure or loss is due to—

  3. the actions of the surety or a person with whom the surety was an associated person over the arrangement’s term; or
    1. the occurrence of an event, if the occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement’s term; or
      1. the non-occurrence of an event, if the non-occurrence could have been influenced by the surety or a person with whom the surety was an associated person over the arrangement’s term.

        1. This section overrides the general permission.

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