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Income Tax Act 2007

Deductions - Expenditure related to use of certain assets

DG 2: Application of this subpart

You could also call this:

“This section explains how to apply specific tax rules for different types of property and expenses”

This law talks about how to apply certain tax rules. You need to follow these rules for each item you own separately. These rules are more important than some other rules about money spent on financing.

If you use something you own for both business and personal reasons, you don’t have to worry about entertainment expense rules for the personal use part.

You can take off some of the interest you pay for residential property from your taxes, but only if these rules allow it and if it’s not stopped by other rules about interest on land.

You don’t have to pay fringe benefit tax when you use something for personal reasons under these rules. If you’re a company and you give benefits to employees who are also shareholders, you must choose to treat those benefits as dividends.

For these rules, a group of companies is treated as if one company owns all the others completely. When figuring out how much of a company someone owns, you look at both voting power and market value.

When working out if one company owns more than 10% of another company, you don’t count the ownership as belonging to the shareholders or anyone else. Also, if someone has no voting power or market value in a company, it doesn’t count as owning any of the company.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5494504.

Topics:
Money and consumer rights > Taxes
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DG 1: What this subpart does, or

“This subpart explains how to calculate tax deductions for mixed-use assets”

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DG 3: Meaning of asset for this subpart, or

“What counts as an asset for tax purposes in this part of the law”

Part D Deductions
Expenditure related to use of certain assets

DG 2Application of this subpart

  1. The rules in this subpart apply on an asset by asset basis.

  2. The rules in this subpart override sections DB 5, DB 7, and DB 8 (which relate to deductions for financing expenditure) in relation to expenditure that this subpart applies to.

  3. Subpart DD (Entertainment expenditure) does not apply to expenditure incurred in relation to the private use of an asset to which this subpart applies.

  4. A person is allowed a deduction for interest incurred for disallowed residential property to the extent to which the deduction is allowed under this subpart, and the deduction is not denied under subpart DH (Interest incurred in relation to certain land).

  5. No liability to pay fringe benefit tax arises from the private use of an asset to which this subpart applies. In circumstances where section CX 17 (Benefits provided to employees who are shareholders or investors) applies to a company to which this subpart also applies, the company must choose to treat a non-cash benefit referred to in that section as a dividend.

  6. For the purposes of this subpart,—

  7. a group of companies is treated as a wholly-owned group of companies:
    1. a voting interest in a company includes a market value interest when a market value circumstance exists for the company.

      1. In this subpart,—

      2. for the purposes of determining the extent to which a company (company A) has a voting interest or market value interest in another company (company B), the look-through rule in section YC 4 (Look-through rule for corporate shareholders) does not apply to treat company A's voting interest or market value interest as held by company A's shareholders or anyone else; and
        1. for the purposes of determining the extent to which company A has a voting interest or market value interest of more than 10% in an associated company, the look-through rule in section YC 4 does not apply to treat a voting interest or a market value interest of company A in the associated company as held by their respective shareholders or anyone else; and
          1. a zero voting interest is not a voting interest, and a zero market value interest is not a market value interest.

            Notes
            • Section DG 2: inserted (with effect on 1 April 2013 and applying for the 2013–14 and later income years for an item of property referred to in section DG 3(2)(a)(i), and for the 2014–15 and later income years for an item of property referred to in section DG 3(2)(a)(ii) and (iii)), on , by section 30(1) of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).
            • Section DG 2(3B) heading: inserted (with effect on 27 March 2021), on , by section 70 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).
            • Section DG 2(3B): inserted (with effect on 27 March 2021), on , by section 70 of the Taxation (Annual Rates for 2021–22, GST, and Remedial Matters) Act 2022 (2022 No 10).