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New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 23: Cost of revenue account property

You could also call this:

“How to claim deductions for property bought to sell for profit”

You can get a deduction for money you spend on property that you buy to sell for profit. This is called revenue account property.

However, you can’t get this deduction in some cases:

If the rules about portfolio investment income apply when you sell the property, you can’t get the deduction.

If you’re a life insurance company, you can’t get the deduction if it would normally be allowed as a policyholder base allowable deduction.

There are special rules for mineral miners who buy land for mining. These rules override the ones mentioned above.

The deduction is allowed under the general permission rule. It overrides the capital limitation and private limitation rules. But the other general limitations still apply.

If the general permission allows the deduction, the rule about not getting the deduction in some cases overrides this.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513625.

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

DB 23Cost of revenue account property

  1. A person is allowed a deduction for expenditure that they incur as the cost of revenue account property.

  2. Despite subsection (1), a person is denied a deduction for expenditure incurred as the cost of revenue account property if—

    1. section CX 55, CX 56B, or CX 56C (which relate to portfolio investment income) applies to income derived by the person from the disposal of the revenue account property; and
      1. for a person who is a life insurer, the expenditure would, in the absence of this subsection, be a deduction included as their policyholder base allowable deduction.

        1. Sections CU 2 (Treatment of mining land) and DU 3 (Acquisition of land for mining operations) override this section in relation to land or an interest in land as described in section CU 2(1)(b) that a mineral miner acquires for the purposes of their mining operations or associated mining operations.

        2. Subsection (1) supplements the general permission and overrides the capital limitation and the private limitation. Subsection (2) overrides the general permission. The other general limitations still apply.

        Compare
        Notes
        • Section DB 23(2) heading: substituted, on , by section 15(1) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
        • Section DB 23(2)(a): repealed, on (applying for the 2010–11 and later income years), by section 73(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section DB 23(2)(b): amended (with effect on 1 July 2010 and applying for income years that include 1 July 2010 and later income years), on , by section 49(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
        • Section DB 23(2)(b): amended, on , by section 15(2) of the Taxation (Tax Administration and Remedial Matters) Act 2011 (2011 No 63).
        • Section DB 23(2)(c): inserted (with effect on 1 July 2010 and applying for income years that include 1 July 2010 and later income years), on , by section 49(2) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
        • Section DB 23(2B) heading: inserted, on , by section 32(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
        • Section DB 23(2B): inserted, on , by section 32(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
        • Section DB 23(3): replaced (with effect on 1 April 2008), on , by section 27(1) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
        • Section DB 23 list of defined terms associated mining operations: inserted, on , by section 32(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
        • Section DB 23 list of defined terms land: inserted, on , by section 32(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
        • Section DB 23 list of defined terms life insurer: inserted (with effect on 1 July 2010), on , by section 49(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
        • Section DB 23 list of defined terms mineral miner: inserted, on , by section 32(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
        • Section DB 23 list of defined terms mining operations: inserted, on , by section 32(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
        • Section DB 23 list of defined terms policyholder base allowable deduction: inserted (with effect on 1 July 2010), on , by section 49(3) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).
        • Section DB 23 list of defined terms portfolio investment entity: repealed (with effect on 1 April 2008), on , by section 73(3) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
        • Section DB 23 list of defined terms private limitation: inserted (with effect on 1 April 2008), on , by section 27(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).