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New Zealand law explained for everyone

Income Tax Act 2007

Deductions - Other expenditure

DX 1: Testamentary annuities

You could also call this:

“Tax deductions for annuities paid due to wills or family agreements”

This law is about when you can get a tax deduction for paying an annuity. An annuity is a regular payment you make to someone, often for the rest of their life.

You can get this deduction if you own property that must pay an annuity because of a will, a court order under the Family Protection Act 1955, or a family agreement. This applies if the property has been given to you as a beneficiary and you have to keep paying the annuity.

You can deduct the amount you pay for the annuity from your taxes. However, there are some limits. You can’t get the deduction if you bought the property and agreed to take on the annuity payments as part of the purchase. Also, the amount you can deduct in a year is limited to the income you get from that property.

A beneficiary in this case means someone who was left property in a will, or who has the right to get the property because of a will, a court order, or a family agreement.

This law allows you to claim this deduction even if it’s a private expense, but other tax rules 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=DLM1514196.

Topics:
Money and consumer rights > Taxes
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Part D Deductions
Other expenditure

DX 1Testamentary annuities

  1. This section applies when—

  2. property is subject to the payment of an annuity—
    1. because of a provision in a will; or
      1. because of a court order under the Family Protection Act 1955; or
        1. because of a deed of family arrangement; and
        2. the property, or property substituted for it, is transferred to a beneficiary; and
          1. the property transferred, or property that the beneficiary substitutes for it, is charged with the payment of the annuity or part of the annuity.

            1. The owner of the property, or the substituted property, is allowed a deduction for an amount that they pay on account of the annuity.

            2. The owner is denied a deduction—

            3. if the owner is not a beneficiary but a person who has acquired the property subject to the condition that they assume the liability for the annuity, or a part of it:
              1. to the extent to which the annuity is payable under a court order or under a deed of family arrangement and represents consideration for the purchase of the property, or the substituted property, by the owner.

                1. The deduction is limited in an income year to the amount that would be the net income of the owner for the corresponding tax year if the owner’s only income in the income year were from the property, or the substituted property.

                2. In this section, beneficiary—

                3. means—
                  1. a person to whom a testator has left the property in their will; or
                    1. a person to whom the testator has given a right to acquire the property in their will; and
                    2. includes a person who is entitled to the property under—
                      1. an order of a court under the Family Protection Act 1955; or
                        1. a deed of family arrangement.

                        2. This section supplements the general permission and overrides the private limitation. The other general limitations still apply.

                        Compare
                        Notes
                        • Section DX 1(3)(a): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section DX 1(5)(a)(ii): amended (with effect on 1 April 2015 and applying for the 2015–16 and later income years), on , by section 242(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).