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Income Tax Act 2007

Timing and quantifying rules - Spreading of specific expenditure

EJ 12: Petroleum development expenditure: default allocation rule

You could also call this:

“ How to spread petroleum development costs over 7 years for tax deductions ”

This section talks about how petroleum miners can deduct their petroleum development costs from their taxes. It applies to costs related to petroleum mining developments in a permit area that were spent on or after 1 April 2008, but only when section EJ 12B doesn’t apply.

When you’re figuring out how much you can deduct for these development costs, you need to spread the deduction equally over 7 years. You start counting these 7 years from the year when you spent the money.

However, there are some exceptions to this 7-year rule. Sections EJ 13 to EJ 16 can change how this works. Also, sections DT 7, DT 8, DT 10, DT 11, and DT 16, which are all about petroleum miners, can override this section entirely.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515128.

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Money and consumer rights > Taxes
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EJ 12B: Petroleum development expenditure: reserve depletion method, or

“How to calculate deductions for petroleum development costs based on reserve depletion”

Part E Timing and quantifying rules
Spreading of specific expenditure

EJ 12Petroleum development expenditure: default allocation rule

  1. This section applies to a petroleum miner's petroleum development expenditure that relates to petroleum mining developments in a permit area and that is incurred on or after 1 April 2008, when section EJ 12B does not apply to the expenditure.

  2. For the purposes of section DT 5(2)(a) (Petroleum development expenditure), a deduction for the petroleum development expenditure is allocated in equal amounts over a period of 7 income years. The period of 7 years starts with the income year in which the expenditure is incurred.

  3. Sections EJ 13 to EJ 16 override subsection (2). Sections DT 7, DT 8, DT 10, DT 11, and DT 16 (which relate to petroleum miners) override this section.

Notes
  • Section EJ 12: substituted (with effect on 1 April 2008), on , by section 127(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
  • Section EJ 12(3): amended, on , by section 70(1) (and see section 70(2) for application) of the Taxation (Annual Rates for 2017–18, Employment and Investment Income, and Remedial Matters) Act 2018 (2018 No 5).