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Income Tax Act 2007

Treatment of tax losses - Mineral miners' and petroleum miners' tax losses

IS 2: Treatment of net losses resulting from certain expenditure

You could also call this:

“Rules for using mining company losses in future tax years”

If you are a mineral mining company and have a net mining loss in a tax year because of mining expenses, you can use this loss in future tax years. You can subtract the loss from your income in a later tax year, even if the company’s ownership has changed. However, there are some rules you need to follow:

You can only subtract the loss up to the amount of income you would have from the mining permit area in that later tax year.

If you can’t use all the loss in one year, you can carry it forward to future years.

You can also use the loss to reduce income that doesn’t come from the mining permit area, but only if you meet certain ownership requirements for the whole period between when you made the loss and when you want to use it.

This rule doesn’t apply to losses that give you a tax credit under section LU 1.

For the purposes of these rules, the net mining loss is treated like a tax loss component.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM1517826.

Topics:
Money and consumer rights > Taxes
Business > Industry rules
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IS 1: General treatment of mineral miners' net losses, or

“How mineral miners' tax losses are treated differently”

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IS 3: Holding companies’ tax losses, or

“This section about holding companies' tax losses was removed from the law”

Part I Treatment of tax losses
Mineral miners' and petroleum miners' tax losses

IS 2Treatment of net losses resulting from certain expenditure

  1. This section applies if a company that is a mineral miner that is a company—

  2. has a net mining loss for a tax year as a result of incurring mining prospecting expenditure, mining exploration expenditure, mining development expenditure, or operational expenditure in a mining permit area; and
    1. has an amount of net mining loss carried forward to a later tax year.

      1. This section does not apply to an amount of net mining loss to the extent to which it gives rise to a tax credit under section LU 1 (Tax credits for mineral miners).

      2. The company may subtract the amount of the net mining loss from its net income for the later tax year, even though the continuity of ownership required under section IA 5 (Restrictions on companies’ loss balances carried forward: continuity of ownership) is broken or is treated as absent under section GB 3 (Arrangements for carrying forward loss balances: companies’ ownership), but only to the extent set out in subsection (3).

      3. The amount subtracted under subsection (2) must be no more than the amount that would be the mineral miner's net income if its only assessable income for the later tax year were from the mining permit area.

      4. If the company cannot use all the net mining loss in the later tax year, the amount is carried forward to later tax years and subsection (2) applies to the remaining balance.

      5. The company may subtract the amount of the net mining loss from its net income that is not attributable to the mining permit area but only after meeting for the whole of the continuity period the requirements set out in sections GB 3 and IA 5(2) and (3). For the purposes of applying section IA 5, the net mining loss is treated as if it were a tax loss component.

      Compare
      Notes
      • Section IS 2 heading: substituted (with effect on 1 April 2008), on , by section 69(1) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2(1): amended, on , by section 98(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2(1)(a): amended, on , by section 98(2) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2(1)(a): amended (with effect on 1 April 2008), on , by section 69(2) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2(1)(b): amended (with effect on 1 April 2008), on , by section 69(3) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2(1B) heading: inserted, on , by section 98(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2(1B): inserted, on , by section 98(3) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2(2): amended (with effect on 1 April 2020), on , by section 113(1)(a) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
      • Section IS 2(2): amended (with effect on 1 April 2020), on , by section 113(1)(b) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
      • Section IS 2(2): amended (with effect on 1 April 2008), on , by section 69(4) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2(3): amended, on , by section 98(4) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2(4): amended (with effect on 1 April 2008), on , by section 69(5) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2(5) heading: added (with effect on 1 April 2008), on , by section 69(6) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2(5): added (with effect on 1 April 2008), on , by section 69(6) of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2(5): amended (with effect on 1 April 2020), on , by section 113(2) of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).
      • Section IS 2 list of defined terms loss balance: repealed (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2 list of defined terms mineral miner: inserted, on , by section 98(5)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2 list of defined terms mining company: repealed, on , by section 98(5)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2 list of defined terms net mining loss: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2 list of defined terms non-resident mining operator: repealed, on , by section 98(5)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2 list of defined terms operational expenditure: inserted, on , by section 98(5)(b) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2 list of defined terms resident mining operator: repealed, on , by section 98(5)(a) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
      • Section IS 2 list of defined terms tax loss: repealed (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).
      • Section IS 2 list of defined terms tax loss component: inserted (with effect on 1 April 2008), on , by section 126 of the Taxation (Consequential Rate Alignment and Remedial Matters) Act 2009 (2009 No 63).