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Income Tax Act 2007

Deductions - Expenditure specific to certain industries

DW 6: Aircraft operators: payments and adjustments under finance leases

You could also call this:

"Aircraft operators: tax rules for lease payments and repairs"

Illustration for Income Tax Act 2007

You lease an aircraft or engine under a finance lease. You meet the requirements of section DW 5(1) to get a deduction for overhaul costs. This means you follow certain rules for payments and adjustments. You pay the lessor for overhaul costs during the lease. You do not get a deduction for these payments. If the lessor pays you back when you do an overhaul, you do not have to pay tax on that amount. If you paid more to the lessor than you got back at the end of the lease, you can get a deduction. This deduction is for the difference between what you paid and what you got back. The lease might say you have to pay or get a payment at the end based on overhaul costs. If you have to pay, you can get a deduction. If you get a payment, it is income under section CG 4(2). This section has its own rules, which override section CG 4.

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View the original legislation for this page at https://legislation.govt.nz/act/public/1986/0120/latest/link.aspx?id=DLM7276309.

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Part DDeductions
Expenditure specific to certain industries

DW 6Aircraft operators: payments and adjustments under finance leases

  1. This section applies when a person leasing under a finance lease an aircraft engine, or an aircraft including an unpriced aircraft engine, meets the requirements of section DW 5(1) for being allowed a deduction for expenditure incurred in performing an aircraft engine overhaul of the aircraft engine.

  2. If, during the term of the lease, the person pays an amount under the lease to the lessor towards the cost of aircraft engine overhauls,—

  3. the person does not have a deduction for the payment; and
    1. a payment of a corresponding amount by the lessor to the person when the person incurs expenditure in performing an aircraft engine overhaul of the aircraft engine is not income of the person.

      1. If, at the end of the lease, the total amount of the payments referred to in subsection (2)(a) exceed the total amount of the payments referred to in subsection (2)(b), the person has a deduction for the income year in which the lease ends equal to the amount of the excess.

      2. If the lease requires the person to pay to the lessor, or the lessor to pay to the person, at the end of the lease an amount that is calculated from the cost of an aircraft engine overhaul and the proportion of the scheduled overhaul period for the aircraft engine that is expired when the lease ends,—

      3. an amount that the person is required to pay is allowed as a deduction of the person; and
        1. an amount that the person is entitled to receive is income of the person under section CG 4(2) (Receipts for expenditure or loss from insurance, indemnity, or otherwise).

          1. This section overrides section CG 4.

          Notes
          • Section DW 6: inserted, on (applying for the 2017–18 and later income years), by section 52(1) of the Taxation (Annual Rates for 2016–17, Closely Held Companies, and Remedial Matters) Act 2017 (2017 No 14).