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Income Tax Act 2007

Deductions - Petroleum mining expenditure

DT 10: Disposal of petroleum mining asset outside association

You could also call this:

“Selling a petroleum mining asset to someone unrelated after an initial sale to a related party”

You might encounter a situation where a petroleum miner sells an asset to someone close to them, and then that person sells it to someone else. This is what the law covers.

When a petroleum miner sells an asset to someone who is either connected to them, holds the asset for them, or holds it for someone connected to them, it’s considered the first step. If that person then sells the asset to someone who isn’t connected to the miner or doesn’t hold the asset for the miner or anyone connected to them, it’s the second step.

In this case, the person who bought the asset from the miner (let’s call them person A) can claim a deduction. The amount they can deduct is the same amount that the miner wasn’t allowed to deduct under section DT 9.

Person A can claim this deduction in the same year they sell the asset to the next person.

This rule adds to the general permission for deductions and overrides the usual rule about capital expenses. However, other general limitations on deductions 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=DLM1514064.

Topics:
Money and consumer rights > Taxes
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DT 9: Disposal of petroleum mining asset to associate, or

“Rules for selling petroleum mining assets to people connected to you”

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DT 11: Association ending, or

“Rules for petroleum miners when ending an association with a connected buyer of their assets”

Part D Deductions
Petroleum mining expenditure

DT 10Disposal of petroleum mining asset outside association

  1. This section applies when—

  2. a petroleum miner disposes of a petroleum mining asset to a person described in subsection (2) (person A); and
    1. person A disposes of the asset to a person described in subsection (3) (person B).

      1. For the purposes of subsection (1)(a), the persons are—

      2. an associated person of the miner; or
        1. a person who holds the asset for the miner; or
          1. a person who holds the asset for an associated person of the miner.

            1. For the purposes of subsection (1)(b), the persons are—

            2. a person not associated with the miner; or
              1. a person who does not hold the asset for the miner; or
                1. a person who does not hold the asset for a person associated with the miner.

                  1. Person A is allowed a deduction.

                  2. The amount of the deduction is the amount for which the petroleum miner is denied a deduction under section DT 9.

                  3. The deduction is allocated to the income year in which person A disposes of the asset.

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

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