Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Farming and aquacultural business expenditure

DO 11: Improvement destroyed or made useless

You could also call this:

“Tax deduction for destroyed or unusable business land improvements”

If you own land or run a business on land, and you’ve made improvements to it for your business (as listed in schedule 20), you might be able to get a tax deduction if something happens to those improvements. This applies if the improvement is destroyed or can’t be used anymore to help you earn income.

You can get this deduction if you would have been able to claim a deduction under section DO 4 or DO 5 if the improvement was still usable. This rule started in the 2005-06 tax year. It’s important to note that you can only claim this if the destruction or uselessness wasn’t caused by you, someone working for you, or someone connected to you.

If this happens, you can deduct the reduced value of the money you spent on the improvement. You can also deduct the cost of removing the improvement from the land.

This rule overrides some usual tax rules, but other general limitations still apply.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513965.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Previous

DO 10: Farming or horticulture expenditure of lessor or sublessor, or

“Deductions for land improvements when renting to farmers”

Next

DO 11B: Entering partners’ livestock deduction, or

“Livestock deduction for new business partners no longer applies”

Part D Deductions
Farming and aquacultural business expenditure

DO 11Improvement destroyed or made useless

  1. This section applies when, in an income year of a person,—

  2. the person owns land, or operates a business on land, to which an improvement described in schedule 20 (Expenditure on farming, horticultural, aquacultural, and forestry improvements) has been made for the purposes of the business; and
    1. the improvement is destroyed or made useless for the purpose of deriving the person's income; and
      1. the person would be entitled for the income year to a deduction under section DO 4 or DO 5 for expenditure on the improvement if the improvement had not been destroyed or made useless; and
        1. the uselessness occurs in an income year that corresponds to the 2005–06 tax year or a later tax year; and
          1. the uselessness is caused other than as a result of the action or failure to act of the person, an agent of the person, or an associated person.

            1. The person is allowed a deduction of the amount of the diminished value, for the income year, of the expenditure on the improvement plus a deduction for the amount of expenditure for removing the improvement from the land referred to in subsection (1)(a).

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

            Compare
            Notes
            • Section DO 11(1)(b): amended (with effect on 1 April 2010 and applying for the 2010–11 and later income years), on , by section 34(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DO 11(1)(c): amended (with effect on 1 April 2010 and applying for the 2010–11 and later income years), on , by section 34(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DO 11(1)(d): amended (with effect on 1 April 2010 and applying for the 2010–11 and later income years), on , by section 34(3) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DO 11(1)(e): amended (with effect on 1 April 2010 and applying for the 2010–11 and later income years), on , by section 34(4) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DO 11(2): amended (with effect on 1 April 2010 and applying for the 2010–11 and later income years), on , by section 34(5) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).