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Income Tax Act 2007

Deductions - Expenditure related to use of certain assets

DG 21: Opting out of treatment under this subpart

You could also call this:

“How to opt out of tax rules for small amounts of income from asset use”

You can choose not to have certain income from using an asset treated under this part of the law if the amount is small or causes problems. If you make less than $4,000 in a year from using an asset, you can choose to treat that money as exempt income under section CW 8B(2). This $4,000 limit doesn’t include any money that’s already exempt under section CW 8B(3).

If you have what’s called “quarantined expenditure” for an asset in a year, you can choose to treat the income that caused this expenditure as exempt under section CW 8B.

When you choose to treat income from an asset as exempt, any interest costs that need to be divided up under section DG 9 are treated as costs from making exempt income.

These rules don’t apply if the person who has the asset is a 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=DLM5494590.

Topics:
Money and consumer rights > Taxes
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DG 20: When income cannot be separately attributed, or

“When income from using an asset in business can't be separated out”

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DG 22: Application of rules to part years, or

“Rules for assets used or owned for part of the year”

Part D Deductions
Expenditure related to use of certain assets

DG 21Opting out of treatment under this subpart

  1. If the amount of income derived for an income year from the use of an asset is less than $4,000, the person who has the asset may choose to treat the income as exempt income under section CW 8B(2) (Certain amounts derived from use of assets). The threshold amount does not include an amount of income exempt under section CW 8B(3).

  2. If, in relation to the use of an asset in an income year, the person has an amount of quarantined expenditure for the income year, they may choose to treat the amount of income derived that gives rise to the quarantined expenditure as exempt income under section CW 8B for the income year.

  3. When a person who has an asset chooses under subsection (1) or (2) to treat the income derived from the use of the asset as exempt income, any interest expenditure that must be apportioned under section DG 9 is treated as expenditure incurred in deriving exempt income.

  4. This section does not apply when the person who has the asset is a company.

Notes
  • Section DG 21: 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).