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Income Tax Act 2007

Deductions - Mineral mining expenditure

DU 7: Deduction for certain mining expenditure spread on basis of units of production

You could also call this:

“Spreading mining costs as a tax deduction based on production”

When you’re a mineral miner, you might spend money on mining operations in an area where you have permission to mine. If you start making money from that area, you can choose to spread out how much of that spending you can deduct from your taxes over time.

To do this, you need to either use special accounting rules or keep good records that the tax office can check. You also have to choose to use this method in a specific way described in another part of the tax law.

This rule doesn’t apply to some types of companies that pass their losses on to their shareholders.

If you choose to use this method, you can’t deduct all the money you spent right away. Instead, you can only deduct as much as is allowed by the rules in another part of the tax law.

This rule overrides the usual limit on deducting money spent on long-term assets. However, you still need to meet the general rules for tax deductions.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1514108.

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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”

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DU 8: Classes of mineral mining expenditure, or

“Types of spending in mineral mining and where to find them in the law”

Part D Deductions
Mineral mining expenditure

DU 7Deduction for certain mining expenditure spread on basis of units of production

  1. This section applies when a mineral miner—

  2. incurs expenditure described in section DU 6(1)(a) on or in relation to their mining operations or associated mining operations in a mining permit area; and
    1. starts to use the permit area to derive income; and
      1. either—
        1. uses IFRS rules to prepare their financial statements; or
          1. keeps appropriate records that are sufficient to enable the Commissioner to verify the calculations used by the mineral miner; and
          2. chooses to apply this section in the way described in section EJ 20E(2) (Certain mining expenditure spread on basis of units of production).

            1. This section does not apply to an amount of mining outgoing excess of a loss-attributing qualifying company.

            2. The mineral miner is denied a deduction for the expenditure except to the extent quantified and allocated under section EJ 20E.

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

            Notes
            • Section DU 7: 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).
            • Section DU 7(1B) heading: inserted, on (with effect on 1 April 2008 and applying for the 2008–09, 2009–10, and 2010–11 income years), by section 59(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).
            • Section DU 7(1B): inserted, on (with effect on 1 April 2008 and applying for the 2008–09, 2009–10, and 2010–11 income years), by section 59(1) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).