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Income Tax Act 2007

Timing and quantifying rules - Spreading of specific expenditure

EJ 3: Spreading forward of fertiliser expenditure

You could also call this:

“How farmers can spread fertiliser costs over time for tax purposes”

If you run a farming or agricultural business on land in New Zealand, you can spread out the cost of fertiliser or lime over several years for tax purposes. This applies to money you spend on buying or applying fertiliser or lime to your land.

You can choose to spread the cost over the next four years after you buy the fertiliser or lime. You can decide how much of the cost to put in each of those four years. If you don’t use all the cost in those four years, you can claim what’s left in the fourth year.

If you stop your business before the end of the four years, you have two choices. You can either claim all the remaining cost in the year you stop your business, or you can spread it evenly over the years from when you bought the fertiliser or lime until you stopped your business.

To make these choices, you need to show it in your tax return for the year you want to use the cost. If you stop your business and want to spread the cost evenly, you need to tell the tax office about this within the time you have to file your last tax return. The tax office might give you more time to do this if needed.

If the person running the business dies, their representative can make these choices for them. Once you choose to spread the cost over the four years, you can’t change your mind.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515094.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
Environment and resources > Farming and fishing
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“Spreading out tax deductions for fishing boat repairs over multiple years”

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“Tax deductions for buying rights to use feature films”

Part E Timing and quantifying rules
Spreading of specific expenditure

EJ 3Spreading forward of fertiliser expenditure

  1. This section applies when—

  2. a person carries on a farming or agricultural business on land in New Zealand; and
    1. the person incurs expenditure in acquiring fertiliser or lime or applying fertiliser or lime to some or all of the land; and
      1. the expenditure is expenditure for which the person is allowed a deduction.

        1. The person may choose to allocate the expenditure by allocating some or all of it, in the proportions they choose, to any 1 or more of the 4 income years following the income year in which they incur the expenditure.

        2. The person is allowed a deduction in the fourth income year following the income year in which they incur the expenditure for any part of the expenditure—

        3. for which they do not claim a deduction in the income year in which they incur the expenditure; or
          1. that they do not allocate under subsection (2).

            1. If the person ceases to carry on the business before the end of the fourth income year following the income year in which they incurred the expenditure, they must choose 1 of the following ways to deal with any part of the expenditure that has not so far been deducted:

            2. the part is to be deducted in the income year in which the person ceases to carry on the business; or
              1. the part is to be allocated equally to the income year in which they incurred the expenditure and the following income years in which the person carried on the business.

                1. An election under this section is made as follows:

                2. a person makes an election under subsection (2) by taking a tax position on that basis in their return of income for the income year to which they choose to allocate some or all of the expenditure:
                  1. a person makes an election under subsection (4),—
                    1. paragraph (a), by taking a tax position on that basis in their return of income for the income year in which the person ceases to carry on the business:
                      1. paragraph (b), by notifying the Commissioner of the allocation within the time within which the person is required to file a return of income for the income year in which the person ceases to carry on the business.

                      2. The Commissioner may extend the time limit imposed under subsection (5)(b)(ii) in any case or class of cases.

                      3. An election under subsection (4) may be made by a deceased’s personal representative.

                      4. An election made under subsection (2) cannot be revoked.

                      Compare
                      Notes
                      • Section EJ 3(1)(b): 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 EJ 3(5) heading: replaced (with effect on 1 April 2020), on , by section 42(1) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section EJ 3(5): replaced (with effect on 1 April 2020), on , by section 42(1) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section EJ 3(5B) heading: inserted (with effect on 1 April 2020), on , by section 42(1) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section EJ 3(5B): inserted (with effect on 1 April 2020), on , by section 42(1) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section EJ 3(7) heading: inserted (with effect on 1 April 2020), on , by section 42(2) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section EJ 3(7): inserted (with effect on 1 April 2020), on , by section 42(2) (and see section 42(4) for application) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section EJ 3 list of defined terms notice: repealed (with effect on 1 April 2020), on , by section 42(3)(b) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section EJ 3 list of defined terms notify: inserted (with effect on 1 April 2020), on , by section 42(3)(a) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
                      • Section EJ 3 list of defined terms tax position: inserted (with effect on 1 April 2020), on , by section 42(3)(a) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).