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Income Tax Act 2007

Timing and quantifying rules - Terminating provisions - Entry to new life insurance regime: transitional and miscellaneous provisions

EZ 66: Prepayments

You could also call this:

“How KiwiRail can claim deductions for prepaid expenses”

If you’re KiwiRail Holdings Limited, you can get a special deduction for the 2012-13 income year. This deduction is for something called an ‘unexpired portion’ that’s linked to Railways assets or liabilities.

The ‘unexpired portion’ is like money that was paid in advance but hasn’t been used up yet. It’s calculated as if New Zealand Railways Corporation had looked at their prepaid expenses on 30 December 2012. They would have treated this date as if it were the end of a tax year.

When figuring out this unexpired portion, you need to imagine that New Zealand Railways Corporation could get a deduction for the expense. But this only applies if the expense is the kind described in section EA 3(1).

From the 2012-13 income year onwards, KiwiRail Holdings Limited needs to follow section EA 3 as if they had been allowed a deduction for the expenses we talked about earlier.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM5505265.

Topics:

Money and consumer rights > Taxes

Business > Industry rules

EZ 65: Expenditure or loss incurred, and amounts derived, or

“How KiwiRail and New Zealand Railways Corporation are treated for tax purposes”

EZ 67: Leased assets, or

“Special rules for KiwiRail's leased assets and personal property lease payments”

Part E Timing and quantifying rules
Terminating provisions: Entry to new life insurance regime: transitional and miscellaneous provisions

EZ 66Prepayments

KiwiRail Holdings Limited has, for the 2012–13 income year, a deduction under section DB 50 (Adjustment for prepayments) for an unexpired portion that is connected with a Railways asset or liability, as described in subsection (2).
For the purposes of subsection (1), the unexpired portion is the unexpired portion that New Zealand Railways Corporation would have had by applying section EA 3(4) to (7) (Prepayments) on 30 December 2012 to an amount of expenditure incurred by New Zealand Railways Corporation in connection with a Railways asset or liability, treating—
30 December 2012 as the end of an income year; and
New Zealand Railways Corporation as a taxpayer with a deduction for the expenditure, if that expenditure is described in section EA 3(1).

For the 2012–13 income year and later income years, section EA 3 applies to KiwiRail Holdings Limited as if it had been allowed a deduction for expenditure to which subsection (1) applies.

Notes

Section EZ 66: inserted (with effect on 31 December 2012), on 17 July 2013, by section 54 of the Taxation (Livestock Valuation, Assets Expenditure, and Remedial Matters) Act 2013 (2013 No 52).