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New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 47: Payments for remitted amounts

You could also call this:

“Tax deductions for payments on previously forgiven debts”

If you owe money and get a tax deduction for it in one year, but later you don’t have to pay all or some of that money, this law might apply to you. It applies when:

You get a tax deduction for money you owe in one year.

Later, you don’t have to pay some or all of that money anymore.

This cancelled debt isn’t counted as a dividend.

You don’t need to do a special calculation called a base price adjustment.

The money you don’t have to pay anymore is counted as income you need to pay tax on.

You make a payment for the amount you no longer owe.

If all these things happen, you can get a tax deduction for the payment you make. You get this deduction in the same year you make the payment.

This law adds to the general rules about what you can claim as a tax deduction. The usual limits on deductions still apply.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513719.

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

DB 47Payments for remitted amounts

  1. This section applies when—

  2. a person is allowed a deduction in an income year of an amount that the person is liable to pay; and
    1. the person’s liability for the amount is later remitted or cancelled, wholly or partly; and
      1. the remission or cancellation is not a dividend; and
        1. the person is not required to calculate a base price adjustment by section EW 29 (When calculation of base price adjustment required); and
          1. the amount to which the remission or cancellation applies is assessable income of the person under section CG 2 (Remitted amounts); and
            1. the person makes a payment for the amount to which the remission or cancellation applies.

              1. The person is allowed a deduction for the amount of the payment in the income year in which it is made.

              2. This section supplements the general permission. The general limitations still apply.

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