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Income Tax Act 2007

Timing and quantifying rules - Environmental restoration accounts

EK 7: Deduction for payment

You could also call this:

“How to calculate your deduction for payments to an environmental restoration account”

When you’re allowed to make a deduction under section DQ 4 for a payment to your environmental restoration account under section EK 2, you need to know how to calculate the amount you can deduct.

To figure out the amount, you use a simple formula: you divide your payment by the tax rate. Your payment is the smaller amount between what you actually paid to the Commissioner under section EK 2 for the income year and the maximum payment you’re allowed for that year.

The tax rate used in the calculation is the highest rate of income tax on taxable income that’s listed in schedule 1. This is the rate that would apply to you for the tax year if you had enough taxable income.

You’re allowed to claim this deduction for the income year in which you make the payment. This means the deduction applies to the same year you put the money into your environmental restoration account.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515172.

Topics:
Money and consumer rights > Taxes
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“Interest earned on money in environmental restoration accounts”

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EK 8: Deduction for transfer, or

“You can claim a tax deduction for money put into an environmental restoration account”

Part E Timing and quantifying rules
Environmental restoration accounts

EK 7Deduction for payment

  1. This section applies when a person is allowed a deduction under section DQ 4 (Environmental restoration accounts scheme) for a payment to their environmental restoration account under section EK 2.

  2. The amount of the deduction is calculated using the formula—

    payment ÷ tax rate.

    Where:

    • The items in the formula are defined in subsections (4) and (5).

    • Payment is the lesser of—

    • the person’s payment to the Commissioner under section EK 2 for the income year; and
      1. the person’s maximum payment for the income year.

        1. Tax rate is the highest rate of income tax on taxable income that—

        2. is set out in schedule 1 (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits); and
          1. would apply to the person for the tax year if the person had sufficient taxable income.

            1. The person is allowed the deduction for the income year for which the payment is made.

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            Notes
            • Section EK 7(5)(a): amended, on , by section 562 of the Taxation (Business Taxation and Remedial Matters) Act 2007 (2007 No 109).