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Income Tax Act 2007

Deductions - Employee or contractor expenditure

DC 3: Pension payments to former partners

You could also call this:

"Tax rules for paying a pension to a former business partner"

You can get a tax deduction for paying a pension to a former partner. This applies when you are in a partnership or running your own business. You must have been in the same business as the old partnership.

You can deduct the amount you pay as a pension if the former partner retired from the old partnership. The former partner or their spouse must have a right to the pension. The pension must be for the former partner's work in the old partnership.

The section HG 2 rule does not apply here. This rule overrides some other tax rules, but other limitations still apply. You can find more information by looking at the 2004 No 35 s DC 3 and the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513762.

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Part DDeductions
Employee or contractor expenditure

DC 3Pension payments to former partners

  1. This section applies when—

  2. a person is a partner in a partnership; or
    1. a person who was a partner in a partnership is in business on their own account.

      1. This section does not apply to a partnership or a business that is engaged wholly or mainly in investing money or in holding, or dealing in, shares, securities, investments, or estates or interests in land.

      2. The person is allowed a deduction for their share of an amount, to the extent to which the amount is reasonable, paid as a pension to a former partner, or to the spouse, civil union partner, or de facto partner of a deceased former partner, if—

      3. the partnership in which the former partner was a partner (the old partnership) carried on the same business as that now carried on either by the partnership that is paying the pension or by the person in business who is paying the pension; and
        1. the former partner retired from the old partnership or their employment ended through retirement; and
          1. the former partner or their spouse, civil union partner, or de facto partner has a right to receive the pension under a deed for a fixed period or for life or, in the case of the spouse, civil union partner, or de facto partner, until the spouse, civil union partner, or de facto partner enters a new marriage, civil union, or de facto relationship; and
            1. the pension is paid for the former partner’s services in the old partnership.

              1. Section HG 2 (Partnerships are transparent) does not apply for the purposes of this section.

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

              Compare
              Notes
              • Section DC 3(3B) heading: inserted (with effect on 1 April 2008), on , by section 41(1) (and see section 41(2) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).
              • Section DC 3(3B): inserted (with effect on 1 April 2008), on , by section 41(1) (and see section 41(2) for application) of the Taxation (Annual Rates for 2024–25, Emergency Response, and Remedial Measures) Act 2025 (2025 No 9).