Income Tax Act 2007

Deductions - Expenditure related to use of certain assets

DG 22: Application of rules to part years

You could also call this:

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

When you use an asset for earning income, personal use, or don’t use it at all for only part of a year, some special rules apply. Here’s how it works:

To figure out if you can deduct expenses for the asset, you need to calculate the number of days. You do this by dividing the number of days you had the asset by 365, then multiplying by 62.

If a company buys an asset during the year, they use the amount owed at the end of the year to calculate deductions. If they sell it during the year, they use the amount owed at the start of the year. If they both buy and sell it in the same year, they use the average of what was owed when they bought it and when they sold it.

When a company buys or sells an asset during the year, they have to split up the interest costs based on how long they owned it.

There’s also a rule about a threshold. You calculate this by dividing the number of days you had the asset by 365, then multiplying by 2%.

For all these calculations, the number of days is how many days in the year you actually had the asset. There are some other rules about how to count the days, which you can find in section DG 9(4).

This text is automatically generated. It might be out of date or be missing some parts. Find out more about how we do this.

View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5494592.

Topics:
Money and consumer rights > Taxes

Previous

DG 21: Opting out of treatment under this subpart, or

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


Next

DH 1: Interest related to certain land, or

“Rules for tax deductions on interest paid for certain types of land”

Part D Deductions
Expenditure related to use of certain assets

DG 22Application of rules to part years

  1. This section applies when the total income-earning use, private use, and non-use of an asset of a person relates to only part of an income year.

  2. For the purposes of section DG 3(1)(b), the number of days is calculated using the formula—

    (days ÷ 365) × 62.

    Where:

    • For the purposes of section DG 11(9), if the company acquires the asset during the income year, the debt value is treated as the outstanding amount at the end of the income year.

    • For the purposes of section DG 11(9), if the company disposes of the asset during the income year, the debt value is treated as the outstanding amount at the start of the income year.

    • For the purposes of section DG 11(9), if the company both acquires and disposes of the asset during the income year, the debt value is treated as the average of the outstanding amounts on the date on which the asset was acquired and the date of its disposal.

    • For the purposes of sections DG 11 to DG 14, when company A acquires or disposes of an asset during an income year, the amount of interest expenditure that must be apportioned is calculated on a pro rata basis.

    • For the purposes of section DG 16(1)(b), the threshold is calculated using the formula—

      (days ÷ 365) × 2%.

      Where:

      • In the formulas in subsections (2) and (7), days is the number of days in the income year on which the person has the asset, and for the purposes of the calculation, section DG 9(4) similarly applies.

      Notes
      • Section DG 22: 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).