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Income Tax Act 2007

Deductions - Expenditure related to use of certain assets

DG 15: Quarantined expenditure rules

You could also call this:

“Rules for limiting expense deductions when an asset doesn't earn enough”

You have rules that limit how much you can deduct for certain expenses in a year. These rules apply when you don’t make enough money from using an asset. If you don’t make enough money, some of your expenses are ‘quarantined’. This means you can’t deduct them that year.

Sections DG 16 and DG 18 explain these rules. They apply to deductions you might take under sections DG 7, DG 8, and DG 11 to DG 14.

If your expenses are quarantined, you might be able to deduct them in a later year. This can happen if you make more money from the asset in that later year. Sections DG 17 and DG 19 explain how this works.

If you have a company, you need to tell the government about these calculations. You do this by giving them special information statements. These statements are required under section 30D of the Tax Administration Act 1994.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5494563.

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

DG 15Quarantined expenditure rules

  1. Sections DG 16 and DG 18 provide the rules that limit the amount of a person's deduction under sections DG 7, DG 8, and DG 11 to DG 14 for an income year when the income derived from the use of the asset does not reach a specified threshold. The excess expenditure is quarantined and denied as a deduction for the income year. Sections DG 17 and DG 19 provide for the allocation of the quarantined amount to a later income year when the income derived is sufficient to offset the expenditure. Companies must provide information disclosure statements under section 30D of the Tax Administration Act 1994 to enable the calculations to be made.

Notes
  • Section DG 15: 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).