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Income Tax Act 2007

Income - Terminating provisions

CZ 32: Treatment of certain petroleum storage facilities

You could also call this:

“How income is calculated when petroleum miners sell underground gas storage facilities”

If you’re a petroleum miner and you sell an underground gas storage facility, this law explains how to calculate the income from that sale. This applies if you’ve previously claimed a deduction for expenses related to the facility.

To work out your income from the sale, you need to use a special formula. The formula takes into account how much you’ve spent on the facility in the past and how much you’ve spent on it recently. It also considers how much money you got from selling the facility.

The law provides a detailed explanation of what each part of the formula means. For example, ‘past expenditure’ is the money you spent on the facility that you’ve already claimed as a deduction. ‘Total expenditure’ includes both your past spending and any recent spending that you can claim a deduction for.

There’s also a special rule about a specific underground gas storage facility. If you have petroleum mining permit number 52278, the facility is considered a petroleum mining asset. This means you can claim deductions for expenses related to the activities listed in the permit’s work programme.

Remember, this law only applies to facilities you’ve claimed deductions for before the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 was enacted.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM6193251.

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Part C Income
Terminating provisions

CZ 32Treatment of certain petroleum storage facilities

  1. This section applies for an income year when a petroleum miner disposes of an underground gas storage facility in relation to which they have been allowed a deduction under section DT 5 (Petroleum development expenditure) for expenditure incurred before the date of enactment of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014.

  2. Despite section CT 1(2) (Disposal of exploratory material or petroleum mining asset), the miner has an amount of income from the disposal of the storage facility for the income year calculated using the formula—

    (past expenditure ÷ total expenditure) × amount on disposal.

    Where:

    • In the formula,—

    • past expenditure is the total amount of expenditure that the miner incurs in relation to the storage facility for which they have been allowed a deduction under section DT 5:
      1. total expenditure is the sum of—
        1. the amount of expenditure that the miner incurs in relation to the storage facility after the date of enactment of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 for which a deduction is allowed; and
          1. the amount of past expenditure referred to in paragraph (a):
          2. amount on disposal is the total amount that the miner derives on the disposal of the storage facility.

            1. Despite section CT 7(2) (Meaning of petroleum mining asset), an underground gas storage facility covered by petroleum mining permit number 52278 is a petroleum mining asset to the extent to which the expenditure incurred by the permit holder relates to activities specified in the work programme set out in schedule 3 of the permit. Permit number 52278 includes a replacement or supplementary permit to the extent to which it covers activities specified in the work programme in schedule 3 of permit 52278.

            Notes
            • Section CZ 32: inserted, on , by section 40 of the Taxation (Annual Rates, Employee Allowances, and Remedial Matters) Act 2014 (2014 No 39).