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Income Tax Act 2007

Deductions - Mineral mining expenditure

DU 5: Farm-out arrangements

You could also call this:

“Tax rules for mining expenses in farm-out deals”

If you’re a farm-in party in a farm-out arrangement, you might spend money on certain mining activities. This spending is called farm-in expenditure. If the farm-out party had spent this money instead of you, it would be considered mining expenditure.

When you spend this money as a farm-in party, it’s treated the same way as if it were mining expenditure. This means you can deduct it from your taxes in the same way.

This rule adds to the general permission for tax deductions and overrides the usual rule about capital expenses. However, you still need to follow other general rules about tax deductions.

If you want to know more about the different types of mining expenditure, you can check section DU 8(1).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514104.

Topics:
Money and consumer rights > Taxes
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DU 6: Deduction for certain mining expenditure spread over assumed life of mine, or

“Spreading tax deductions for mining development costs over the mine's expected lifespan”

Part D Deductions
Mineral mining expenditure

DU 5Farm-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 fall into 1 of the classes of mining expenditure referred to in section DU 8(1).

  2. The farm-in expenditure is treated as if it were the applicable class of mining expenditure.

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

Notes
  • Section DU 5: replaced, on (applying for the 2014–15 and later income years), by section 41(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).