Plain language law

New Zealand law explained for everyone

Income Tax Act 2007

Timing and quantifying rules - Terminating provisions

EZ 5: Reduction: bloodstock not previously used for breeding in New Zealand: pre-1 August 2006

You could also call this:

“ Reducing tax value for bloodstock first used for breeding in New Zealand before 1 August 2006 ”

This law is about how to reduce the value of certain bloodstock (horses used for breeding) for tax purposes. It applies to bloodstock that wasn’t used for breeding in New Zealand before 16 December 1991.

You can use this rule if you got the bloodstock from someone who hadn’t used it for breeding in New Zealand. There are two exceptions: if you got it through a relationship agreement, or if you and the previous owner were companies in the same group.

For stallions, you can reduce the value by 25% of what you paid for it. Or, you can choose a method called the “reducing value method”. If you pick this method, you reduce the value by 37.5% in the first year, and then 37.5% of the remaining value each year after that. You need to tell the tax office if you choose this method.

For broodmares, you use a special formula to work out the reduction. The formula is different depending on the age of the broodmare and when you started using it for breeding.

The law also explains how to calculate the age of the broodmare for these formulas. If the broodmare is older than a certain age, you use a set number instead of its actual age.

This law is quite detailed and uses some complicated maths. If you need to use these rules, you might want to ask an adult or a tax expert to help you understand them better.

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1515990.

Topics:
Money and consumer rights > Taxes
Previous

EZ 4B: Cattle destroyed because of Mycoplasma bovis: spreading, or

“Spreading income over six years for cattle culled due to Mycoplasma bovis”

Next

EZ 6: Reduction: broodmare previously used for breeding in New Zealand: pre-1 August 2006, or

“Calculating tax value for older NZ breeding horses”

Part E Timing and quantifying rules
Terminating provisions

EZ 5Reduction: bloodstock not previously used for breeding in New Zealand: pre-1 August 2006

  1. This section applies to bloodstock that—

  2. was not used for breeding in New Zealand before 16 December 1991; and
    1. before a person (person A) acquired it, was not used for breeding in New Zealand by any other person, unless—
      1. the other person transferred the bloodstock to person A under a relationship agreement to which section FB 18 (Bloodstock) applies; or
        1. the other person and person A were companies in the same wholly-owned group at the time person A acquired the bloodstock from the other person; and
        2. section EC 39(1) or (2) (First income year in breeding business) applies to,—
          1. before 1 August 2006; or
            1. for an income year ending on or after 1 August 2006, if a requirement of paragraphs (a) to (c) of section EC 39(1) or (2) is first met before 1 August 2006.

            2. For the purposes of sections EC 39 and EC 40 (which relate to bloodstock), the reduction applying to the value of a stallion is 25% of the cost price of the stallion unless person A chooses to value the stallion by the reducing value method.

            3. When person A chooses to value the stallion by the reducing value method, the reduction applying to the value of the stallion is 37.5% of its cost price in the first income year and 37.5% of its opening value in each later income year. Person A must give notice to the Commissioner of their election in their return of income for the first income year.

            4. For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a broodmare is calculated using the formula—

              1.25 × cost price of broodmare ÷ (15 − age of broodmare).

              Where:

              • In the formula in subsection (4), age of broodmare is—

              • 12 years of age; or
                1. the actual age in years, if the broodmare is 11 years of age or less at the end of the income year.

                  1. For the purposes of sections EC 39 and EC 40, the reduction applying to the value of a broodmare to which section EC 39(2) applies is calculated using the formula—

                    1.25 × cost price of broodmare ÷ (11 − age of broodmare).

                    Where:

                    • In the formula in subsection (6), age of broodmare is—

                    • 8 years of age; or
                      1. the actual age in years, if the broodmare is 7 years of age or less at the end of the income year.

                        Compare
                        Notes
                        • Section EZ 5(1)(b)(i): amended (with effect on 1 April 2008), on , by section 156(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EZ 5 list of defined terms matrimonial agreement: repealed (with effect on 1 April 2008), on , by section 156(2)(a) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                        • Section EZ 5 list of defined terms relationship agreement: inserted (with effect on 1 April 2008), on , by section 156(2)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).