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Income Tax Act 2007

Deductions - Specific rules for expenditure types

DB 64: Capital contributions

You could also call this:

“How capital contributions might reduce your tax deductions for certain property or expenses”

If you receive a capital contribution after 20 May 2010, you might be able to reduce the amount of tax deduction you can claim for certain property or expenses. This applies if you would normally be allowed a deduction for the property or expenses related to the capital contribution, and if you choose to use this rule in your tax return for the year you received the contribution.

When you use this rule, it affects how much you can claim as a deduction for wear and tear (depreciation) on the property, or for farming and aquaculture expenses. The amount of the capital contribution is subtracted from the value of the property or the amount of the expense when calculating your deduction.

This rule overrides the general permission for deductions in the tax law. It’s important to note that you have to choose to apply this rule; it’s not automatic.

If you want to know more about how depreciation is calculated, you can look at subpart EE. For information about farming and aquaculture expenses, you can check subpart DO.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM3019326.

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Part D Deductions
Specific rules for expenditure types

DB 64Capital contributions

  1. This section applies if,—

  2. a person has derived a capital contribution after 20 May 2010; and
    1. in the absence of this section, the person would be allowed a deduction for the relevant capital contribution property, or for the relevant expenditure for the capital contribution property; and
      1. the person has chosen to apply this section in a return of income for the income year in which the capital contribution is derived.

        1. For the purposes of quantifying the amount of depreciation loss under subpart EE (Depreciation) in relation to the capital contribution property or the amount of deduction under subpart DO (Farming and aquacultural business expenditure) in relation to expenditure for the capital contribution property,—

        2. the capital contribution property's adjusted tax value, base value, cost, or value, as applicable, is reduced by the amount of the capital contribution, under subpart EE:
          1. the relevant expenditure for the capital contribution property is reduced by the amount of the capital contribution, under subpart DO.

            1. This section overrides the general permission.

            Notes
            • Section DB 64: inserted (with effect on 20 May 2010), on (applying for capital contributions derived after 20 May 2010), by section 76(1) of the Taxation (Budget Measures) Act 2010 (2010 No 27).
            • Section DB 64(1)(b): replaced (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on , by section 29(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DB 64(2) heading: replaced (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on , by section 29(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DB 64(2): replaced (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on , by section 29(2) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DB 64 list of defined terms capital contribution property: inserted (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on , by section 29(3) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DB 64 list of defined terms expenditure: inserted (with effect on 1 April 2011 and applying for the 2011–12 and later income years), on , by section 29(3) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).