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Income Tax Act 2007

Deductions - Forestry expenditure

DP 8: Forestry business on land acquired from the Crown, Maori owners, or holding company: no deduction

You could also call this:

“No tax deduction for forestry businesses paying interest on certain Crown or Māori land loans”

If you run a forestry company, you can’t get a deduction for interest you pay on a special type of loan called a qualifying debenture if the person receiving the interest doesn’t have to pay tax on it. This is because the interest is considered exempt income under section CW 3.

The same rule applies if you run a Maori investment company. You also can’t get a deduction for interest paid on a qualifying debenture if the person receiving it doesn’t have to pay tax on it.

There’s a rule called Section FA 2B about stapled debt securities, but it doesn’t apply to qualifying debentures in this case.

These rules override the general permission that usually allows deductions. This means that even if you would normally be allowed to deduct this interest, you can’t in this situation.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1513993.

Topics:
Money and consumer rights > Taxes
Māori affairs > Māori land
Business > Industry rules
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“You can't claim tax deductions for land shaping costs related to timber sales”

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DP 9: Cost of acquiring timber: forestry business on land acquired from the Crown, Maori owners, or holding company, or

“How to calculate the cost of timber when buying forested land from specific sellers”

Part D Deductions
Forestry expenditure

DP 8Forestry business on land acquired from the Crown, Maori owners, or holding company: no deduction

  1. A forestry company is denied a deduction for interest to which both the following apply:

  2. it is paid by the company under a qualifying debenture issued by the company; and
    1. it is exempt income of the person deriving it, under section CW 3 (Forestry companies and Maori investment companies).

      1. A Maori investment company is denied a deduction for interest to which both the following apply:

      2. it is paid by the company under a qualifying debenture issued by the company; and
        1. it is exempt income of the person deriving it, under section CW 3.

          1. Section FA 2B (Stapled debt securities) does not apply to a qualifying debenture.

          2. This section overrides the general permission.

          Compare
          Notes
          • Section DP 8 heading: amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
          • Section DP 8(3) heading: replaced, on (not applying, for an income year, to a debenture that a person is party to, if the debenture is issued under an arrangement entered into before 22 November 2013; and a binding ruling on the application of section FA 2(5) was issued to the person in relation to the arrangement; and the binding ruling would continue to apply but for the repeal of the substituting debenture rule by the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (the Act); and for the whole of the income year, the total amount and the term of all debentures issued under the arrangement are not more than those disclosed in the application for the binding ruling; and the person makes an irrevocable election in writing, received by the Commissioner on or before 31 July 2014, that the repeal of the substituting debenture rule in the Act does not apply to their debenture), by section 61(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
          • Section DP 8(3): replaced, on (not applying, for an income year, to a debenture that a person is party to, if the debenture is issued under an arrangement entered into before 22 November 2013; and a binding ruling on the application of section FA 2(5) was issued to the person in relation to the arrangement; and the binding ruling would continue to apply but for the repeal of the substituting debenture rule by the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (the Act); and for the whole of the income year, the total amount and the term of all debentures issued under the arrangement are not more than those disclosed in the application for the binding ruling; and the person makes an irrevocable election in writing, received by the Commissioner on or before 31 July 2014, that the repeal of the substituting debenture rule in the Act does not apply to their debenture), by section 61(1) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).
          • Section DP 8 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).
          • Section DP 8 list of defined terms substituting debenture: repealed, on (not applying, for an income year, to a debenture that a person is party to, if the debenture is issued under an arrangement entered into before 22 November 2013; and a binding ruling on the application of section FA 2(5) was issued to the person in relation to the arrangement; and the binding ruling would continue to apply but for the repeal of the substituting debenture rule by the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (the Act); and for the whole of the income year, the total amount and the term of all debentures issued under the arrangement are not more than those disclosed in the application for the binding ruling; and the person makes an irrevocable election in writing, received by the Commissioner on or before 31 July 2014, that the repeal of the substituting debenture rule in the Act does not apply to their debenture), by section 61(2) of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).