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 the value of horses not used for breeding in New Zealand before August 2006"

This law is about bloodstock, which are horses used for breeding. You need to know if the horse was used for breeding in New Zealand before. If it was not used for breeding here before 16 December 1991, this law applies.

If you buy a horse, you must check if it was used for breeding in New Zealand before you bought it. There are some exceptions, like if the other person transferred the horse to you under a relationship agreement to which section FB 18 applies. You can also check if the other person and you were companies in the same wholly-owned group.

There are rules about how much the horse's value can be reduced. For a stallion, the reduction is 25% of its cost price, unless you choose to use the reducing value method. If you choose the reducing value method, the reduction is 37.5% of its cost price in the first year and 37.5% of its opening value in later years.

For a broodmare, the reduction is calculated using a formula: 1.25 times the cost price divided by 15 minus the age of the broodmare. The age of the broodmare is either 12 years or its actual age if it is 11 years or less. There is a different formula if section EC 39(2) applies: 1.25 times the cost price divided by 11 minus the age of the broodmare.

The age of the broodmare in this case is either 8 years or its actual age if it is 7 years or less. You must follow these rules when working out the reduction for your horse's value. You can find more information in sections EC 39 and EC 40.

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This page was last updated on 5 August 2025

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

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Part ETiming and quantifying rules
Terminating provisions

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

This section applies to bloodstock that—
was not used for breeding in New Zealand before 16 December 1991; and
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
2. 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
section EC 39(1) or (2) (First income year in breeding business) applies to,—
1. before 1 August 2006; or
2. 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.

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

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

Compare

2004 No 35 s EZ 4B

Notes

Section EZ 5(1)(b)(i): amended (with effect on 1 April 2008), on 24 February 2016, 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 24 February 2016, 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 24 February 2016, by section 156(2)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).