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Income Tax Act 2007

Deductions - Expenditure related to use of certain assets

DG 8: Expenditure limitation rule

You could also call this:

“Rules for claiming expenses on assets used to earn income”

You can get money back (a deduction) for costs or losses you have when using an asset to make money. This includes wear and tear on the asset. The amount you can claim is worked out using a special calculation in section DG 9(2).

When dealing with assets in general:

If you already split up the costs for an asset based on how much space it takes up or something similar, you’ll use that method instead of the rules in this part of the law.

When you sell an asset that has lost value over time, you might have to pay some money back. This is explained in section EE 49.

If you lose money when you sell an asset, there are rules about how to handle that in sections EE 44 to EE 48, and EE 50(6) and (7).

This rule adds to the general permission for deductions and overrides some limits, but other limits still apply. It also changes section EE 50(2), which is about how much you can claim when you only use part of an asset to make money.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5494522.

Topics:
Money and consumer rights > Taxes
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DG 7: Expenditure related to income-earning use, or

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

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DG 9: Apportionment formula, or

“How to calculate the tax-deductible portion of an asset's expenses”

Part D Deductions
Expenditure related to use of certain assets

DG 8Expenditure limitation rule

  1. A person is allowed a deduction for expenditure or loss, including an amount of depreciation loss, that they incur in relation to the income-earning use of an asset to the extent of the amount calculated using the formula in section DG 9(2).

  2. In the treatment of assets generally,—

  3. if some or all of the expenditure on an asset is apportioned for tax purposes on the basis of space, floor area, or on another similar basis, that method of apportionment overrides the rules in this subpart to the extent of the amount of the deduction:
    1. depreciation recovery income on disposal is dealt with in section EE 49 (Amount of depreciation recovery income when item partly used for business):
      1. depreciation loss on disposal is dealt with in sections EE 44 to EE 48, and EE 50(6) and (7) (which relate to amounts of depreciation loss).

        1. This section—

        2. supplements the general permission and overrides the capital limitation and the private limitation, but the other limitations still apply:
          1. overrides section EE 50(2) (Amount of depreciation loss when item partly used to produce income).

            Notes
            • Section DG 8: 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).