Plain language law

New Zealand law explained for everyone

 Plain Language Law homepage
Back to
DT 13: Disposal of ownership interests in controlled petroleum mining entities
or “Tax implications when selling shares in oil and gas companies”
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.

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 It might be out of date or be missing some parts.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

Next up: DT 15: Persons associated with petroleum miner

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

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.

Compare