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Income Tax Act 2007

Deductions - Petroleum mining expenditure

DT 1A: Ring-fenced allocations

You could also call this:

“Limiting deductions for overseas petroleum mining expenses”

When you spend money on certain types of petroleum activities, you can sometimes claim these costs as deductions. These activities include exploring for petroleum, developing petroleum resources, and other related expenses.

If you’re doing petroleum mining outside of New Zealand, there’s a limit to how much you can claim as a deduction each year. You can only claim up to the amount of money you’ve made from your overseas petroleum mining in that same year.

If you have more expenses than you can claim in one year, you can carry them forward to the next year. These carried-forward expenses are treated as if they were new expenses related to your overseas petroleum mining in the next year.

However, there’s a catch. If the rules about carrying forward tax losses for companies wouldn’t let you carry these expenses forward, then you can’t claim them in future years either. These rules are explained in sections IA 5, IB 3, IP 3, and IP 3B of the law.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM2534875.

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Part D Deductions
Petroleum mining expenditure

DT 1ARing-fenced allocations

  1. This section applies to an amount of a person's deductions for expenditure and loss for an income year to the extent to which it is—

  2. petroleum exploration expenditure:
    1. petroleum development expenditure:
      1. residual expenditure.

        1. If, but for this subsection, an amount that relates to petroleum mining operations undertaken outside New Zealand would be allocated to an income year (the current year), including an amount carried forward and allocated to the current year, the amount that is allocated to the current year is no more than the amount of the person's income derived for the current year from all petroleum mining operations undertaken outside New Zealand.

        2. Any excess not allocated to the current year because of subsection (2) is carried forward and treated as—

        3. relating to petroleum mining operations undertaken outside New Zealand for the next income year; and
          1. allocated to that next income year.

            1. Despite subsection (3), the excess is not allocated to the next income year, and no deduction is allowed or allocated to any income year for the excess, if sections IA 5, IB 3, IP 3, and IP 3B (which relate to the carrying forward of tax losses for companies) would not have allowed the excess to be carried forward to that next income year in a loss balance, treating the excess as a tax loss component arising on the last day of the current year.

            Notes
            • Section DT 1A: inserted (with effect on 1 April 2008), on , by section 97(1) of the Taxation (International Taxation, Life Insurance, and Remedial Matters) Act 2009 (2009 No 34).
            • Section DT 1A(4): amended (with effect on 1 April 2020), on , by section 76 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
            • Section DT 1A(4): amended (with effect on 1 April 2020), on , by section 33 of the Taxation (Annual Rates for 2020–21, Feasibility Expenditure, and Remedial Matters) Act 2021 (2021 No 8).