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Income Tax Act 2007

Deductions - Expenditure related to use of certain assets

DG 7: Expenditure related to income-earning use

You could also call this:

“Claiming expenses for assets used only to earn taxable income”

You can claim a deduction for money you spend or lose, including depreciation, if it’s only related to using an asset to earn income that isn’t exempt. This applies when you wouldn’t expect to get a personal benefit from the spending, or if you’re a company, your associates wouldn’t benefit either. You can also claim if you have to spend money to meet rules that let you use the asset to earn income, and you wouldn’t have spent the money if not for those rules.

Even though this is the case, you need to know that all the money you spend on repairs and maintenance for an asset is limited by section DG 8. But this limit doesn’t apply to fixing damage described in section DG 4(4).

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5494520.

Topics:
Money and consumer rights > Taxes
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Part D Deductions
Expenditure related to use of certain assets

DG 7Expenditure related to income-earning use

  1. A person is allowed a deduction for expenditure or loss, including an amount of depreciation loss, to the extent to which the amount incurred—

  2. relates solely to the use of an asset for deriving income of the person, other than exempt income; and
    1. is expenditure—
      1. from which the person would not reasonably expect to receive a personal benefit, or for a company, an associate of the person:
        1. that the person must reasonably incur to meet a regulatory requirement so that they may use the asset for deriving income and that would not have been incurred but for the requirement.

        2. Despite subsection (1) and for the avoidance of doubt, all expenditure on repairs and maintenance incurred in relation to an asset must be treated as expenditure that is limited under section DG 8. However, this subsection does not apply to the cost of repairing damage described in section DG 4(4).

        Notes
        • Section DG 7: 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).