Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Forestry expenditure

DP 3: Improvements to forestry land

You could also call this:

“Tax deductions for improving forestry land”

This law is about improving forestry land in New Zealand. If you run a forestry business on land in New Zealand and make improvements to the land, you might be able to claim some money back on your taxes.

If you own the land, you can claim money back for the cost of improvements if:

  • You or someone else made the improvements
  • The work was done from 1995 onwards, but not in the year you sell the land
  • The improvements help develop the land
  • The improvements benefit your business in the year you’re claiming

If you don’t own the land but run a forestry business on it, you can claim money back for improvements if:

  • You made the improvements yourself
  • The work was done from 1995 onwards, but not in the year you stop running your business on that land
  • The improvements help develop the land
  • The improvements benefit your business in the year you’re claiming

To work out how much money you can claim back, you need to use a special formula. This formula uses a percentage from schedule 20 and something called the ‘diminished value’ of the improvement.

Remember, even though this law lets you claim money for land improvements, you still need to follow other tax rules.

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 It might be out of date or be missing some parts.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=DLM1513980.

Topics:
Money and consumer rights > Taxes
Environment and resources > Farming and fishing
Business > Industry rules
Previous

DP 2: Plant or machinery, or

“Deductions for machinery used in forestry businesses”

Next

DP 4: Improvement destroyed or made useless, or

“Tax deduction for forestry improvements destroyed or made unusable”

Part D Deductions
Forestry expenditure

DP 3Improvements to forestry land

  1. This section applies when—

  2. a person carries on a forestry business on land in New Zealand; and
    1. an improvement described in schedule 20, part G (Expenditure on farming, horticultural, aquacultural, and forestry improvements) has been made to the land.

      1. A person who owns the land is allowed a deduction for expenditure to which all the following apply:

      2. it is incurred on making the improvement; and
        1. it is incurred by the person or by another person; and
          1. it is incurred in the 1995–96 income year or in a later income year, not including the income year in which the person disposes of the land, the income year being the income year of the person who owns the land; and
            1. it is incurred in developing the land; and
              1. it is of benefit to the business in the income year in which the person is allowed the deduction.

                1. A person who does not own the land is allowed a deduction for expenditure to which all the following apply:

                2. it is incurred on making the improvement; and
                  1. it is incurred by the person; and
                    1. it is incurred in the 1995–96 income year or in a later income year, not including the income year in which the person ceases to carry on the business on the land; and
                      1. it is incurred in developing the land; and
                        1. it is of benefit to the business in the income year in which the person is allowed the deduction.

                          1. The amount of the deduction is calculated using the formula—

                            schedule 20 percentage × diminished value.

                            Where:

                            • In the formula,—

                            • schedule 20 percentage is the percentage set out opposite the description of the improvement in schedule 20, part G:
                              1. diminished value is the diminished value of the improvement.

                                1. This section overrides the capital limitation. The general permission must still be satisfied and the other general limitations still apply.

                                Compare
                                Notes
                                • Section DP 3 list of defined terms forestry business: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).