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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 deductions for reasonable pension payments to retired former business partners or their spouses”

You can deduct money from your taxes if you pay a pension to a former partner or their spouse. This applies if you’re in a partnership or running your own business. However, it doesn’t apply if your business mainly deals with money, shares, or land.

The pension payment must be reasonable. It can be paid to a former partner or to the spouse of a deceased former partner. For this to be allowed, your current business must be the same as the one the former partner was in. The former partner must have retired from that business.

The former partner or their spouse must have a right to get the pension. This right should be written down and say how long they’ll get the pension. For a spouse, the pension might stop if they get married again.

The pension must be for the work the former partner did in the old business. This rule adds to the general permission for tax deductions and overrides the capital limitation. Other general limitations 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=DLM1513762.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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DC 2: Pension payments to former employees, or

“Tax deductions for pensions paid to former employees who retired or were made redundant”

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DC 3B: Payments to working owners, or

“Rules for claiming deductions on payments to owners who work for their company”

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

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