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Income Tax Act 2007

Deductions - Petroleum mining expenditure

DT 14: Farm-out arrangements

You could also call this:

“Tax deductions for farm-in parties in farm-out arrangements”

If you are a farm-in party in a farm-out arrangement, you can get a tax deduction for certain expenses. These expenses are called farm-in expenditure. They include things like petroleum development, exploratory well, or prospecting costs.

The law treats your farm-in expenditure as if it were petroleum development, exploratory well, or prospecting expenditure. This means you can claim a deduction for these costs.

You can only claim a deduction for farm-in expenditure that you spent on or after 16 December 1991. If you spent money before this date, you need to look at section DZ 5 of the law.

This rule adds to the general permission for tax deductions and overrides the capital limitation. However, other general limitations still apply to your deduction.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514076.

Topics:
Money and consumer rights > Taxes
Environment and resources > Farming and fishing
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DT 13: Disposal of ownership interests in controlled petroleum mining entities, or

“Tax implications when selling shares in oil and gas companies”

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DT 15: Persons associated with petroleum miner, or

“Rules for people working with petroleum miners who have existing privileges”

Part D Deductions
Petroleum mining expenditure

DT 14Farm-out arrangements

  1. This section applies when a farm-in party under a farm-out arrangement incurs farm-in expenditure that, if it were incurred by the farm-out party, would be petroleum development expenditure, exploratory well expenditure, or prospecting expenditure.

  2. The farm-in expenditure is treated as if it were petroleum development expenditure, exploratory well expenditure, or prospecting expenditure, as applicable.

  3. The farm-in party is allowed a deduction for the farm-in expenditure that is incurred under the farm-out arrangement on or after 16 December 1991.

  4. Farm-in expenditure that is incurred before 16 December 1991 is dealt with in section DZ 5 (Farm-out arrangements for petroleum mining before 16 December 1991).

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

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