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Income Tax Act 2007

Tax credits and other credits - Tax credits for mineral miners

LU 1: Tax credits for mineral miners

You could also call this:

“Tax credits for mineral miners who have losses or specific expenses”

If you’re a mineral miner in New Zealand, you might be able to get a tax credit in certain situations. This can happen when you spend money on fixing up a mining area, sell land for less than you bought it for, or spend money developing a mining area that you no longer have permission to use.

To get this tax credit, your mining losses for the year need to be more than the money you made from other sources. The government will look at your mining losses as if they were your only income, and your other income as if you had no mining income.

The amount of tax credit you can get is based on how much you spent or lost, multiplied by the basic income tax rate. However, there’s a limit to how much credit you can get. It can’t be more than the amount calculated by the formula, or more than the income tax you’ve paid in previous years for that mining area.

If you’re running a trust that does mining, the tax credit is based on the tax paid by the trust. If you’re an individual miner, it’s based on your personal tax payments, as if mining was your only income.

When you get this tax credit, the mining loss that led to the credit doesn’t count towards your other tax losses. You can use this credit to reduce your tax bill or get a refund.

Remember, this is just a simple explanation of the law. If you need to use this information, you should talk to a tax expert who can help you understand how it applies to your specific situation.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM6037628.

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Part L Tax credits and other credits
Tax credits for mineral miners

LU 1Tax credits for mineral miners

  1. This section applies for an income year when—

  2. either—
    1. a mineral miner incurs an amount of mining rehabilitation expenditure in relation to a mining permit area; or
      1. a mineral miner derives an amount under section CU 2 (Treatment of mining land) from the disposal of land or an interest in land in a mining permit area, and the amount the mineral miner derives from the disposal is less than the consideration that the mineral miner paid to acquire the land or interest in land; or
        1. a mineral miner incurs an amount of mining development expenditure in relation to a mining permit area for which the mining permit has been relinquished, has expired, has been revoked or surrendered, as those terms are used in the Crown Minerals Act 1991, and the miner has no existing privilege for the permit area; and
        2. the mineral miner has a net mining loss for the mining permit area for the income year that is greater than the net income of the mineral miner for the income year from all other sources (the difference being the excess amount), calculated as follows:
          1. the mineral miner’s net mining loss is treated as if their only income were income derived from the mining permit area:
            1. the net income of the mineral miner from other sources is treated as if there were no income from the mining permit area.

            2. The mineral miner has a tax credit for the tax year corresponding to the income year for an amount calculated using the formula—

              expenditure or loss × tax rate.

              Where:

              • In the formula,—

              • expenditure or loss is the excess amount referred to in subsection (1)(b) to the extent to which it consists of the amounts referred to in subsection (1)(a)(i) to (iii):
                1. tax rate is the basic rate of income tax set out in schedule 1, part A (Basic tax rates: income tax, ESCT, RSCT, RWT, and attributed fringe benefits).

                  1. Despite subsection (2), the maximum amount of the credit must not be more than the lesser of—

                  2. the result of the formula; and
                    1. the amount of income tax paid by the mineral miner on net income derived for all earlier tax years to the extent to which it relates to the mining permit area, calculated on a year-by-year basis and aggregated.

                      1. For the purposes of subsection (4), if the mineral miner is a trustee of a trust, the amount of tax paid for each earlier tax year is determined—

                      2. first, by reference to the amount of income tax paid under the obligations of a trustee under section HC 32 (Liability of trustee as agent); and
                        1. secondly, by reference to the amount of tax paid on trustee income; and
                          1. calculated on a year-by-year basis and aggregated.

                            1. For the purposes of subsection (4), if the mineral miner is an individual, the amount of tax paid for earlier tax years is calculated on a year-by-year basis and aggregated, as if their only income were income derived from the mining permit area.

                            2. In subsections (4)(b), (5)(c) and (6), a reference to a calculation on a year-by-year basis refers to a calculation starting with the immediately preceding tax year and working backwards to earlier tax years until the amount of tax paid is equal to or more than the amount referred to in subsection (4)(a).

                            3. To the extent to which the mineral miner has a tax credit under this section, the amount of the net mining loss giving rise to the credit does not form part of either a tax loss component or a net mining loss for the mineral miner.

                            4. The tax credit is available for use under section LA 6(2) (Remaining refundable credits: PAYE, RWT, and certain other items).

                            5. Subsection (8) overrides sections IA 2 and IA 7 (which relate to losses generally) and IS 1, IS 2, and IS 6 (which relate to tax losses for mineral mining).

                            Notes
                            • Section LU 1: inserted, on (applying for the 2014–15 and later income years), by section 106(1) of the Taxation (Annual Rates, Foreign Superannuation, and Remedial Matters) Act 2014 (2014 No 4).
                            • Section LU 1(4)(b): amended (with effect on 1 April 2014), on , by section 204(1) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                            • Section LU 1 list of defined terms net income: inserted (with effect on 1 April 2014), on , by section 204(2)(b) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).
                            • Section LU 1 list of defined terms net mining income: repealed (with effect on 1 April 2014), on , by section 204(2)(a) of the Taxation (Annual Rates for 2015–16, Research and Development, and Remedial Matters) Act 2016 (2016 No 1).